We expect Live Nation Entertainment, Inc. (NYSE:LYV) to beat expectations when it reports second-quarter 2016 results on second-quarter 2016 results on Jul 28, after the market closes.
Last quarter, the live entertainment company posted a positive earnings surprise of 6.45%. Also, the company beat estimates in two of the four trailing quarters.
Let's see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Live Nation is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +100.00%. This is meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: Live Nation carries a Zacks Rank #3 (Hold), which when combined with positive ESP makes us confident of an earnings beat.
The Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.
Currently, the stock is trading at $25.65. We expect the earnings release to lead to stock movement.
What is Driving the Better-Than-Expected Earnings?
Live Nation operates through four segments – Concerts, Ticketing, Artist Nation, and Sponsorship & Advertising. In 2015, all segments – especially Concerts – witnessed revenue growth backed by higher tickets. We expect the trend to continue in the to-be-reported quarter as well.
Further, the company has improved the ticket booking experience with an enhanced website and app by including Apple (NASDAQ:AAPL) Pay (Apple’s mobile payment and digital wallet) and integration (API) with Apple Spotlight (the search feature of Apple's OS X and iOS). We expect these initiatives to drive second-quarter revenues.
Additionally, Live Nation's ticketing business operates under the well-known brand, Ticketmaster. This leading ticketing sales platform has been posting solid revenues over the past few quarters. The company boasts a significant presence in this high-margin agency business where it charges a fee for selling tickets on behalf of its clients. We believe that the revenue growth momentum in the Ticketing segment will continue in the to-be reported quarter.
Moreover, during the first quarter Live Nation launched its first fully functional API with Bandsintown, which enabled fans to directly search Ticketmaster's inventory and buy tickets without leaving the Bandsintown app. It also launched the same feature with Facebook (NASDAQ:FB), both through its app and website. These initiatives are expected to continue increasing ticket sales in the to-be-reported quarter, thereby translating to higher earnings.
Stocks to Consider
Here are some stocks in the consumer discretionary sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter.
Callaway Golf Co. (NYSE:ELY) with an Earnings ESP of +12.12% and a Zacks Rank #1.
Pool Corporation (NASDAQ:POOL) with an Earnings ESP of +1.00% and a Zacks Rank #2.
Boyd Gaming Corporation. (NYSE:BYD) , with an Earnings ESP of +3.33% and a Zacks Rank #2.
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