What to watch for in Paramount's Q1 earnings

Yahoo Finance entertainment reporter Allie Canal previews Paramount's Q1 earnings report amid a struggling advertising market.

Video transcript

- Meantime, Paramount is set to report its first quarter earnings before the bell Thursday. Yahoo Finance reporter Alexandra Canal is here with us. Allie, so what should investors expect from the media juggernaut?

ALEXANDRA CANAL: So investors should likely expect to see continued softness in the ad market, especially as those macroeconomic challenges continue to be a headwind. Management has said that in the back half of this year, we will see a bit of that ad market recovery so keep an eye out for any conversation or discourse in the earnings call about how the ad market is faring.

In terms of those key metrics, here are some numbers to look out for. According to Bloomberg consensus estimates, revenue expected to come in at 743 billion. Adjusted earnings per share of $0.14. Then Paramount Plus subscriber net additions. That's expected to come in at 3 million, with global Pluto monthly active users hitting 82 million.

We do know that the streaming side of the business, that's become an incredibly important element for Paramount. We've seen the company merge its Paramount Plus streaming service with Showtime to create one big product offering to try and take on some of those bigger competitors. Losses, though, as we've really seen across a sector, those have continued to accelerate. In the last quarter, Paramount reported a direct to consumer loss of 575 million compared to a loss of 502 million in the prior year period.

So any acceleration of those losses, that's going to be a disappointment to investors. We do know that price increases across the various streaming tiers, that's expected to hit at some point later this year. That's going to help with earnings. That's going to help with free cash flow. But until we get there, there's likely going to be quite a lot of pain. So we'll see what this quarter brings.

- Yeah. So streaming challenges certainly a factor that we will be looking at tomorrow. And Paramount, of course, has long been rumored as a potential acquisition target due to its small size relative to competitors. So what's the latest on Paramount potentially being a target or selling parts of its business?

ALEXANDRA CANAL: Well, it's still TBD at this point. But I will say that we're hearing more and more potential sales. The company has tiptoed around selling its BET Media Group. There were many reports on that that includes the cable channels BET, VH1 with Tyler Perry and media mogul Byron Allen, two names that were floated around as potential buyers there. And we did hear from Naveen Chopra, Paramount CFO. He came on Yahoo Finance shortly after those reports. And he said, any way that we can bring value to shareholders, we're going to explore that. So neither confirming nor denying.

But it's not just BET. Also with Showtime. The "Wall Street Journal" reporting that Paramount turned down a $3 billion offer for former executive David Nevins to go and purchase Showtime. So these are clearly conversations that are happening. I will say what's probably preventing that full blown media M&A right now is the fact that we're in this unfavorable operating environment. Interest rates are high. We saw the Fed once again raise those rates.

However, experts that I've spoken with have said in the back half of this year and well into 2024 we're going to see that activity pick up again. And we know Bob Bakish, he has said consolidation is the name of the game. So that's something that we're tracking very closely.

- My old boss.

ALEXANDRA CANAL: Yes.

- At the top of the food chain, though. Not a direct report there. So we will certainly be watching the numbers tomorrow. One headwind that we aren't going to see come out in the numbers tomorrow, but the writers strike and the impact that will potentially have to the company. Allie Canal, our thanks to you.