What Awaits Warner Bros. Discovery (WBD) in Q3 Earnings?

Warner Bros. Discovery WBD is set to report third-quarter 2022 results on Nov 3.

For the quarter, the Zacks Consensus Estimate for loss is pegged at a penny per share, down from estimated earnings of 16 cents per share in the past 30 days. The figure indicates a 102.3% plunge from the year-ago quarter’s reported figure.

The consensus mark for revenues is pegged at $10.51 billion, implying a 233.6% surge from the year-ago quarter’s reported figure.

The company’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, missing the same in one. Warner Bros. Discovery has a trailing four-quarter negative earnings surprise of 18.69%, on average.

On Apr 8, 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 third-quarter 2022 performance is expected to have witnessed a steady ad-spending environment. The company generates more than 50% of its revenues from advertising.

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. 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 second-quarter 2022 with 92.1 million global DTC subscribers compared with 90.4 million subscribers in the previous quarter, as adjusted for the company's new DTC subscriber definition. The new definition resulted in the exclusion of 10 million legacy Discovery non-core subscribers and inactivated AT&T mobility subscribers from the previous quarter subscriber count. The trend is expected to have continued in the to-be-reported quarter.

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 lineup 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 third quarter.

Key Q3 Announcements

HBO Max has canceled six upcoming animated series, including Batman: Caped Crusader, which was meant to build on Batman: The Animated Series, co-created by Timm and aired on Fox Kids for 85 episodes from 1992-1995.

The other projects, which have been put on halt include Merry Little Batman, The Day The Earth Blew Up: A Looney Tunes Movie, Bye Bye Bunny: A Looney Tunes Musical, Did I Do That To The Holidays: A Steve Urkel Story, and The Amazing World of Gumball: The Movie. All six projects will continue production while they are shopped to other outlets.

They are among dozens of titles that have been cut or removed from the streaming service as Warner Bros Discovery continues its cost-cutting measures, ahead of the merger of the HBO Max and Discovery+ services next year.

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 -1600.00% and currently carries a Zacks Rank #5 (Strong Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some stocks worth considering, as our model shows that these have the right combination of elements to beat on earnings this season.

Fortinet FTNT has an Earnings ESP of +0.92% and a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Fortinet is set to report third-quarter 2022 results on Nov 2. The Zacks Consensus Estimate for FTNT’s earnings is pegged at 27 cents per share, suggesting an increase of 35% from the prior-year period’s reported figure.

The Trade Desk TTD has an Earnings ESP of +2.13% and a Zacks Rank of 2 at present.

The Trade Desk is scheduled to release third-quarter 2022 results on Nov 14. The Zacks Consensus Estimate for TTD’s earnings is pegged at 24 cents per share, suggesting an increase of 33.3% from the prior-year quarter’s reported figure.

Tencent Music Entertainment Group TME has an Earnings ESP of +4.76% and a Zacks Rank of 2 at present.

Tencent Music is scheduled to release third-quarter 2022 results on Nov 15. The Zacks Consensus Estimate for TME’s earnings is pegged at 11 cents per share, suggesting an increase of 22.2% from the prior-year quarter’s reported figure.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.