News Corp. (NWSA) Q3 Earnings: Will the Stock Disappoint?

News Corporation NWSA, the diversified media conglomerate, is slated to report third-quarter fiscal 2016 results on May 5. The big question facing investors now is, whether the company will be able to deliver a positive earnings surprise in the quarter to be reported. In the trailing four quarters, News Corporation missed the Zacks Consensus Estimate by an average of 11.3%. In the preceding two quarters, the company underperformed the Zacks Consensus Estimate. Let’s see how things are shaping up for this announcement.

Zacks Model Shows Unlikely Earnings Beat

Our proven model does not conclusively show that News Corporation is likely to beat earnings estimates 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. News Corporation has an Earnings ESP of -20.00% as the Most Accurate estimate stands at 4 cents, while the Zacks Consensus Estimate is pegged at 5 cents. Moreover, the company carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors Influencing this Quarter

Foreign currency headwinds and soft advertising demand may weigh upon the company’s performance in the quarter to be reported. Advertising, which forms a major part of News Corporation’s total revenue (approximately 44% of fiscal 2015 total revenue), remains highly vulnerable to the economic conditions. Total advertising revenue dropped 6% during the second quarter of fiscal 2016. Advertising revenue declined across its News and Information Services segment.

However, News Corporation is in a transitional phase, looking to diversify its revenue streams. Moreover, a sturdy balance sheet provides it with the financial flexibility to focus on strategic acquisitions, operational enhancement and shareholder-friendly moves.

Stocks Poised to Beat Earnings Estimates

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

Twenty-First Century Fox, Inc. FOXA has an Earnings ESP of +2.17% and a Zacks Rank #3 (Hold).

Discovery Communications, Inc. DISCA has an Earnings ESP of +2.22% and a Zacks Rank #3.

Nexstar Broadcasting Group, Inc. NXST has an Earnings ESP of +19.40% and a Zacks Rank #3.

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