What to Expect When World Wrestling Entertainment Reports Earnings
Investors in World Wrestling Entertainment (NYSE: WWE) have had plenty to cheer about. Shares of the sports-entertainment company are up a whopping 150% so far in 2018, and up an even more impressive 275% over the past 12 months.
Recent broadcast media deals have propelled the stock higher, so investors will be watching closely when WWE reports the financial results for the 2018 second quarter after the market closes on Thursday, July 26. Let's take a look at a few items of interest to investors going into the company's earnings report.
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Off the top rope
For the first quarter, WWE reported revenue that was on par with last year's figure, but excluding the impact of adopting a recent accounting change, its revenue of $187.7 million represented an increase of 5% year over year. Adjusted operating income before depreciation and amortization (OIBDA) of $35.2 million increased 40% compared to the prior-year quarter, and jumped 68% excluding the impact of accounting changes.
Paid subscribers increased by 5% year over year to 1.56 million, slightly ahead of the 1.53 million the company had forecast. Based on the strength of its first-quarter results, WWE raised its full-year guidance for adjusted OIBDA to at least $150 million — an all-time record — up from the previous forecast of $145 million (excluding stock-based compensation).
The main event
WWE has made several key announcements since its previous earnings report, signing "landmark" deals with Twenty-First Century Fox (NASDAQ: FOX)(NASDAQ: FOXA) and Comcast (NASDAQ: CMCSA). The company revealed that it had inked a new five-year contract to broadcast its flagship program, SmackDown Live, on Fox Sports beginning in October 2019. The program regularly boasts the sixth-largest audience among cable originals, slightly behind the ratings of news and political talk shows. While the terms of the deal were not disclosed, some reports place the value of the agreement north of $1 billion, according to The Hollywood Reporter.
The company also announced a renewal of its contract with USA Network, which will continue to be the broadcast home of Monday Night Raw, with the new deal beginning in October 2019. NBC is reportedly paying $265 million annually for the wrestling mainstay, up from $80 million per year previously.
The Raw and SmackDown deals increased the average annual value of WWE's distribution in the U.S. to 3.6 times the value of the previous deal, according to WWE.
The raw numbers
The company said it "anticipates a meaningful increase in revenue based on the distribution of new content in certain international markets, as well as higher rights fees in existing content agreements and the continued growth of WWE Network." For the second quarter, WWE expects OIBDA in a range of $30 million to $34 million, which would be year-over-year growth between 23% and 40%. The company is expecting about 1.77 million paid subscribers, an 8% increase compared to the prior-year quarter.
For their part, analysts, on average, are forecasting quarerly revenue of $239.58 million and earnings per share of $0.16. That would represent increases of 11.6% and 166% year over year, respectively.
A word about valuation
It's important to note that the massive run-up in the stock price over the past year has resulted in an equally impressive increase in its valuation. Its P/E ratio now clocks in at a nosebleed 137, with a forward multiple of 86. While the excitement about these recent agreements is certainly understandable, there's a lot of growth already built into the current stock price, so there's potential for significant volatility.
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