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Will Shaw Communications (SJR) Disappoint This Earnings Season?

Zacks Equity Research

Canadian cable multiple-system operator, Shaw Communications Inc. (SJR) is slated to report second-quarter fiscal 2014 financial numbers before the opening bell on Apr 10, 2014.

In the last quarter, the company missed the Zacks Consensus Estimate by 4.17%. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter

Shaw Communications continues to consolidate its position across Canada by gradually expanding its Wi-Fi network and deploying high-speed DOCSIS 3.0 network in several western Canadian markets. Moreover, the launch of “Shaw Go” – an innovative TV Everywhere service – coupled with rate hikes is likely to trigger top-line growth in the forthcoming quarters.

Furthermore, the acquisition of Canwest Global Communications Corp. (“Canwest”), which includes the GlobalTV network, will not only help Shaw Communications to position itself as one of the leading entertainment and communications companies in the Canadian broadcasting industry but will also allow it to diversify its operations, thereby creating better growth prospects.

However, the continuous loss of cable TV subscribers coupled with intense competition from Telus Corp.’s popular Optik TV, huge debt, rising capital expenditure and deteriorating cash position continue to act as headwinds for Shaw Communications.

Earnings Whispers

Our proven model does not conclusively show that Shaw Communications is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.

Negative Zacks ESP: ESP for Shaw Communications is -2.63%. This is because the Most Accurate estimate stands at 37 cents while the Zacks Consensus Estimate is higher at 38 cents.

Zacks Rank: Shaw Communications’ Zacks Rank #3 (Hold) when combined with a negative ESP makes surprise prediction difficult.

We caution against stocks with Zacks #4 and #5 Ranks (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some companies you may consider as our model shows these have the right combination of elements to post an earnings beat.

Liberty Interactive Corporation (LINTA) with earnings ESP of +8.0% and a Zacks Rank #3 .

TiVo Inc. (TIVO) with earnings ESP of +33.33% and a Zacks Rank #3.

Starz (STRZA) with earnings ESP of +3.77% and a Zacks Rank #2 (Buy).

Read the Full Research Report on SJR
Read the Full Research Report on LINTA
Read the Full Research Report on TIVO
Read the Full Research Report on STRZA

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