Scripps Networks Poised to Gain from TVN Buy Amid Volatility

On Jul 6, 2015, we issued an updated research report on Scripps Networks Interactive Inc. SNI.

Scripps Networks has delivered positive earnings surprises in the last four quarters, with an average beat of 8.05%. The company reported first-quarter 2015 results wherein the bottom line surpassed the Zacks Consensus Estimate while the top line missed the same.

Scripps Networks is a pure-play lifestyle cable network offering six channels and across 200 countries. All these cable channels have loyal audience, who also view Scripps Networks' content on non-TV platforms. This helps the company to explore non-TV verticals like magazines (print media) and websites (Internet).

Recently, Scripps Networks wrapped up a 52.7% stake buy in Poland's popular multi-platform media company, TVN. We believe that the acquisition will strengthen Scripps Networks' presence in Europe considerably. Moreover, the media market in Poland offers strong growth potential and will enhance Scripps Networks' advertising market opportunities to a great extent.

On the flipside, Scripps Networks is highly exposed to foreign currency exchange rate risks due to its presence in Europe and Asia. Moreover, acquisition of other media companies will lead to integration risks for the company. Meanwhile, the lifestyle programming market is highly competitive. Scripps Networks faces stiff competition in both its Lifestyle Media and Interactive Services businesses from alternative providers of similar services.

Scripps Networks is a late entrant into international markets compared to its close competitors, limiting the company's revenue opportunities from offshore markets. Moreover, mounting programming costs and rising debt levels continue to act as headwinds for the company.  

Scripps Networks currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include Gray Television, Inc. GTN, Sirius XM Holdings Inc. SIRI and Discovery Communications, Inc. DISCK. All the three companies carry a Zacks Rank #2 (Buy).

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