Scripps Networks (SNI) Down 4.8% Since Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Scripps Networks Interactive, Inc SNI. Shares have lost about 4.8% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Scripps Networks Q1 Earnings Beat, Revenues in Line

Scripps Networks reported better-than-expected results in the first quarter of 2017. The company's earnings (excluding special items) of $1.53 per share surpassed the Zacks Consensus Estimate of $1.18. Also, the bottom line improved 11.68% on a year-over-year basis.

The company's first-quarter operating revenues of $855.1 million were in line with the Zacks Consensus Estimate. Revenues were up 4.7% year over year on strong TV advertising and distribution revenues in the U.S.

First-quarter consolidated segment profits (on an adjusted basis) totaled $368.7 million, up 6.3% year over year. Quarterly operating income (on a reported basis) rose 13.6% year over year to $329.55 million.

At the end of the first quarter of 2017, Scripps Networks had $107.67 million in cash & cash equivalents and $2,803.5 million of outstanding debt (less current portion) on its balance sheet, compared with $122.94 million and $2,952.4 million, respectively, at the end of 2016. In addition, free cash flow at the end of the first quarter of 2017 was almost $164.93 million, compared with $221.98 million in the prior-year quarter.

Segmental Performance

U.S.Networks

Quarterly revenues came in at $736.9 million, up 4.9% year over year. Advertisement revenues climbed 5.1% year over year to $512.1 million oncontinued strength in pricing in the U.S. advertising market for the company's lifestyle offerings. Distribution revenues also increased 4.5% year over year to $211.1 million, driven by an increase in negotiated annual rate and revenues from new over-the-top distribution platforms.

Other revenues improved 6.9% year over year to $13.7 million. Segmental (adjusted) profits came in at $383.6 million, up 5.6% year over year on higher revenues.

Segmental operating revenues from brands like HGTV, Food Network, Travel Channel, Cooking Channel, Digital Business and other revenues improved 5.3%, 6.1%, 1.9%, 11%, 4.3% and 10.2% year over year, respectively. Nonetheless, DIY Network and Great American Country revenues dropped 2.5% and 1.4%, respectively, year over year.

International Networks

Quarterly total revenue of $125.5 million was up 3.5% year over year. Segmental adjusted profits totaled $15.5 million, up 58.16% on the back of higher revenues.

Conversely, loss (adjusted) from the Corporate and Other segment widened to $30.4 million from $26.3 million a year ago.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.

Scripps Networks Interactive, Inc Price and Consensus

Scripps Networks Interactive, Inc Price and Consensus | Scripps Networks Interactive, Inc Quote

VGM Scores

At this time, the stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with a 'F'. The stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Sscore of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is equally suitable for value and growth investors while momentum investors may want to look elsewhere.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.