Market Overview

Earnings Preview: Scripps Networks Interactive

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Scripps Networks Interactive (NYSE: SNI) is scheduled to report third-quarter 2011 results Thursday, November 3, after the markets close. In its previous report, the company ended a streak of three quarters of year-over-year profit growth when it fell short of consensus estimates. However, revenues increased for the fourth quarter in a row, a streak which investors no doubt hope will continue.

This time, the consensus forecast calls for Scripps Networks to report earnings of $0.65 per share, which would be an increase of 9.2% from the same quarter of last year. But that estimate has slipped from $0.68 per share 90 days ago. Note though that the company has not fallen short of consensus EPS estimates in the past ten quarters.

Analysts also expect the company to post revenues of $512.1 million, or a 0.7% increase from a year ago. Looking ahead to the full year, the forecast so far calls for revenues to be 1.3% higher, with per-share earnings up 14.7% from a year ago.

The Company

Knoxville, Tenn.-based Scripps Networks Interactive operates as a global lifestyle content and Internet search company. Its on-air programming is complemented with online video, social media areas and e-commerce components on companion websites and broadband vertical channels. Its media portfolio includes lifestyle television and Internet brands such as HGTV, Food Network, Travel Channel, DIY Network and the Cooking Channel. The company currently has a market cap of $6.8 billion.

During the three months that ended in September, the company selected a new executive vice president of content distribution and marketing. It struck a deal to acquire a 50% equity interest in UKTV, a multichannel TV programming company in the UK. And it attributed the decline in net income in the second quarter to the sale of online shopping site Shopzilla.

Performance

The company has a long-term earnings per share growth forecast of 13.9% and its return of equity is 28.9%. The P/E ratio is less than the industry average and the PEG ratio is 0.9. The operating margin is higher than the industry average. And its dividend yield is 0.9%. Analysts have a mean price target on the stock of $49.88 per share, which gives it some room to run from the current price near $41.

The share price is up more than 14% in the past month, rising from the neighborhood of its 52-week low. But shares are still trading about 16% lower than at the beginning of the year. The share price is above the 50-day moving average. Over the past six months, the stock has underperformed competitors Discovery Communications (NASDAQ: DISCA) and Viacom (NYSE: VIA), as well as the broader markets.

Action Items:

Bullish: Investors interested in exchange traded funds invested in Scripps Networks Interactive might want to consider the following trades:

  • Guggenheim Spin-Off (NYSE: CSD) is about 7% higher than a year ago.
  • PowerShares Dynamic Leisure & Entertainment (NYSE: PEJ) is more than 7% higher than a year ago.
  • PowerShares Dynamic Media (NYSE: PBS) is more than 3% higher than a year ago.

Bearish: Traders may want to consider these alternative positions:

  • Discovery Communications (NASDAQ: DISCA) is about 14% higher than three months ago.
  • Viacom (NYSE: VIA) is about 14% higher than a month ago.

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

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