Yahoo Finance What Awaits Warner Bros. Discovery (WBD) in Q1 Earnings?
Warner Bros. Discovery WBD is set to report first-quarter 2023 results on May 5.
For the quarter, the Zacks Consensus Estimate for loss is pegged at 21 cents per share, narrowing from the loss of 32 cents per share in the past 30 days.
The consensus mark for revenues is pegged at $10.63 billion, implying a 236.51% surge from the year-ago quarter’s reported figure.
On Apr 8, 2022, Discovery and AT&T's Warner Media unit completed the previously announced merger to form a combined company, Warner Bros. Discovery.
Let’s see how things have shaped up for this announcement.
Warner Bros. Discovery, Inc. Price and EPS Surprise
Warner Bros. Discovery, Inc. price-eps-surprise | Warner Bros. Discovery, Inc. Quote
Factors to Consider
Warner Bros. Discovery’s first-quarter 2023 performance is expected to have witnessed a steady ad-spending environment. The company generates more than 50% of its revenues from advertising.
In the fourth quarter, Advertising revenues increased 34.6% year over year to $2.28 billion. This trend is likely to have continued in the to-be-reported quarter. In the to-be-reported quarter, the company signed a deal with VideoAmp to measure its audience as an alternative means of data for advertisers. The deal also gives Warner Bros. Discovery another data set to provide to advertisers at a time when the industry is considering alternatives to legacy measurement firm Nielsen.
The company boasts a strong non-fiction content portfolio. The increasing availability of its content across linear, digital over-the-top platforms like Hulu and Sling TV, is expected to have improved traffic in the to-be-reported quarter. Steady demand for unscripted content is likely to have contributed to Dplay’s performance.
Steady viewership of multiple channels, including Discovery Channel, Animal Planet, Food Network, HGTV, MotorTrend, Science, TLC, ID, Oprah, Eurosport, the Cooking Channel and UKTV Lifestyle are expected to have aided top-line growth in the to-be-reported quarter.
WBD ended fourth-quarter 2022 with 96.1 million global DTC subscribers compared with 94.9 million subscribers in the previous quarter. The relaunch of HBO Max on Amazon Channels in December helped subscriber growth. The trend is expected to have continued in the to-be-reported quarter.
Markedly, WBD increased HBO Max’s ad-free subscription fee in the United States by $1 to $15.99 plus taxes a month, applicable from Feb 11, 2023. This is the first ever hike done by the streaming platform since its launch in 2020.
HBO Max also launched a cheaper ad-supported plan last year but the slowdown in the advertising market didn’t let HBO benefit from it. Thus, to bolster revenues from the streaming division, Warner Bros. Discovery had to consider a hike in the monthly rates.
This makes HBO the second most expensive OTT platform after its rival Netflix NFLX, which has a monthly plan at $19.99.
However, the upcoming recessionary fears could draw back users from spending such high amounts on their recreational activities. The massive content slashing by HBO Max to cut down on its costs is expected to have made the streaming platform unappealing for users in the to-be-reported quarter. HBO Max has canceled the reboot of Gossip Girl after streaming it for two seasons.
Discovery+ is off to an impressive start. Discovery+ became a sister service to AT&T's WarnerMedia's HBO Max in April 2022, following the merger with Discovery into Warner Bros.
The availability of Discovery+ on LG Smart TVs in Canada, including LG’s line-up of award-winning LG OLED TVs and LG QNED MiniLED TVs, is expected to have aided the top line in the to-be-reported quarter.
International revenues are likely to have been boosted by an improvement in the ad-spending environment, particularly in the U.K., Italy, Germany and Poland.
However, incremental spending on direct-to-consumer initiatives (marketing and content costs) is expected to have hurt profitability in the fourth quarter.
Warner Bros. Discovery has been finding itself in a thick soup lately. Along with losses that it is facing on its high-budget movies, the company has been in high debt ever since the merger of Warner Media and Discovery. This is expected to have weighed on its margins in the to-be-reported quarter.
As of Dec 31, 2022, the average duration of the company's outstanding debt was 14 years, with an average cost of debt of 4.3%.
The long-term debt for fourth-quarter fiscal 2022 was $48.99 billion compared with $48.612 in the prior quarter.
What Our Model Says
Per the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.
Warner Bros. Discovery has an Earnings ESP of -55.42% and currently carries a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks to Consider
Here are few stocks worth considering, as our model shows that these have the right combination of elements to beat on earnings this season.
Carvana CVNA has an Earnings ESP of +19.16% and a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
CVNA is scheduled to release its first-quarter 2023 results on May 4. The Zacks Consensus Estimate is pegged at a loss of $1.91 per share, suggesting an increase of 33.91% from the prior-year quarter’s reported figure.
Jack In The Box JACK has an Earnings ESP of +4.09% and a Zacks Rank #2 at present.
JACK is set to report second-quarter fiscal 2023 results on May 17. The Zacks Consensus Estimate for JACK’s earnings is pegged at $1.16 per share, flat year over year.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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