WWE (WWE) Down 8.8% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for World Wrestling Entertainment (WWE). Shares have lost about 8.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is WWE due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
World Wrestling Q2 Earnings Lag Estimates, Revenues Up Y/Y
World Wrestling Entertainment posted second-quarter 2023 results, wherein the top line beat the Zacks Consensus Estimate while the bottom line missed the same. Total revenues and net income increased year over year.
On the earnings release, management highlighted that Money in the Bank was the highest-grossing arena event of all time. The company’s premium live events like WrestleMania, Night of Champions and Backlash set viewership records with year-over-year growths of 29%, 45% and 34%, respectively.
On Apr 3, 2023, WWE announced an agreement to combine WWE and UFC to form a new publicly listed company. Upon closing, Endeavor (parent company of UFC) will hold a 51% controlling interest and existing WWE shareholders will hold a 49% interest in the new company. The deal is expected to be completed in the second half of 2023.
Q2 Performance Insight
This Stamford, CT-based company reported second-quarter 2023 adjusted earnings of 91 cents per share, which missed the Zacks Consensus Estimate of 93 cents. The quarterly earnings increased significantly from 59 cents per share reported in the prior-year quarter.
WWE’s revenues of $410.3 million surpassed the consensus mark of $399 million. Also, the metric improved by 25% from the year-ago period. The increase was driven by a shift in the timing of the staging of a large-scale international event and a rise in live event revenues. Also, higher revenues related to the media rights fees for the company’s flagship weekly programing and premium live events boosted revenues.
A Look at Margins
WWE’s operating income of $87.3 million increased 26% year over year, driven by higher revenues, partially offset by an increase in operating expenses. We note that the operating income margin remained stable year-over-year at 21%.
Adjusted OIBDA came in at $140.7 million, up 54% year over year. The adjusted OIBDA margin expanded to 34% from 28%. Our estimate for the adjusted OIBDA margin was 32.7% for the quarter under review.
Management expects third-quarter 2023 adjusted OIBDA between $75 million and $85 million. The company expects revenues to decline in the third quarter on a year-over-year basis. The quarterly revenue outlook indicates lower revenues from the Consumer Products segment and third-party original programming. For 2023, WWE continues to project adjusted OIBDA in the range of $395-$410 million. The company also expects 2023 results to reflect an increase in operating expenses, including certain costs to support the creation of content.
Segment Details
Media Division: Revenues in the Media Division increased 31.8% to $320.3 million. The year-over-year increase was driven by a large-scale international event and higher revenues associated with the contractual escalation of media rights fees for its flagship weekly programming. In the quarter, we had expected revenues of $307 million from this segment.
Core content rights fees increased to $154.8 million from $148.5 million in the prior-year period. Network revenues came in at $80.1 million, up from $67 million reported in the year-ago quarter.
Meanwhile, advertising and sponsorship revenues increased to $18.9 million from $17.9 million in the year-ago period. Other media revenues surged to $66.5 million from $9.7 million in the prior-year period.
Live Events: Revenues from Live Events came in at $62 million, up 51% from the year-ago quarter’s figure. The upside can be attributed to an increase in both domestic and international ticket sales and a rise in advertising and sponsorship revenues.
The company held 53 ticketed live events in the reported quarter, consisting of 43 events in North America and 10 events in international markets. The average attendance at the North American events was roughly 9,900. North American ticket sales increased to $40.3 million from $34.9 million in the year-ago period. The segment’s adjusted OIBDA increased 150% to $34.5 million in the quarter under review.
Consumer Products Division: The segment’s revenues of $28 million decreased 37% year over year. We note that consumer product licensing revenues came in at $15.6 million, down from $22.6 million in the year-ago period.
Meanwhile, e-commerce sales declined to $4.6 million from $12.9 million in the prior-year period. Venue merchandise sales declined to $7.8 million from $8.6 million in the year-ago quarter.
Other Financial Details
WWE ended the quarter with cash and cash equivalents of $317.8 million, net short-term investments of $206.1 million, long-term debt of $20.6 million and stockholders’ equity of $909.3 million. Cash flow generated from operating activities during the quarter amounted to $77 million, while free cash flow was $31.1 million.
The company paid out $9.8 million to shareholders in dividends in the second quarter. WWE did not repurchase any shares during the quarter. As of Jun 30, 2023, the company had approximately $211 million remaining under its share repurchase authorization of $500 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -6.84% due to these changes.
VGM Scores
At this time, WWE has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, WWE has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
WWE is part of the Zacks Film and Television Production and Distribution industry. Over the past month, Imax (IMAX), a stock from the same industry, has gained 1.1%. The company reported its results for the quarter ended June 2023 more than a month ago.
Imax reported revenues of $97.98 million in the last reported quarter, representing a year-over-year change of +32.5%. EPS of $0.26 for the same period compares with $0.07 a year ago.
Imax is expected to post earnings of $0.14 per share for the current quarter, representing a year-over-year change of +380%. Over the last 30 days, the Zacks Consensus Estimate has changed +12.5%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Imax. Also, the stock has a VGM Score of B.
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