One of my favorite stocks in my Accelerated Profits newsletter just smashed company records for sales. And while the entertainment company missed analysts estimates, its overall results were so strong that Wall Street shrugged it off completely. This is the kind of rock-solid strength that I look for in my earnings seasons picks. So, if you’re looking for another fundamentally superior stock to add to your portfolio this earnings season, keep on reading…
There’s often a lot of debate over whether professional wrestling is “real” or scripted. I’m talking, of course, about the WWE, which is produced by World Wrestling Entertainment, Inc. (WWE), not the wrestling that you see every four years in the Olympics.
Personally, I think the WWE contests are purely entertainment-based. But when it comes to earnings, sales and shareholder value, WWE is the real deal. Let me explain…
World Wrestling Entertainment provides original content to its more than 650 million viewers in North America, Europe, Africa, the Middle East, the Asia Pacific and Latin America. The company actually has on-demand and scheduled programing available in more than 180 countries.
Recently, World Wrestling Entertainment inked multi-year TV deals with the USA Network and Fox Sports for Raw and SmackDown. For the next five years, Monday Night Raw will still air on the USA Network, and Fox Sports will show SmackDown Live every Friday. Clearly, the USA Network and Fox Sports want to continue to capitalize on WWE’s popularity.
Back in the first quarter, the company reported that it experienced a record number of subscribers and viewership for WrestleMania. And, as you might have guessed, expanding subscriptions and viewership adds nicely to WWE’s top and bottom lines.
World Wrestling Entertainment reported 445% annual operating income growth and 1,544.4% annual net income growth in the first quarter. First-quarter earnings per share came in at $0.18, which walloped analysts’ estimates by 38.5%. WWE has posted an average 26% earnings surprise in each of the last four quarters.
Considering that the analyst community has been scrambling to nail down WWE’s profit potential over the past three months, I’ve been anxiously awaiting WWE’s second-quarter report. And I wasn’t disappointed: World Wrestling Entertainment announced record results for its second quarter before the stock market opened today.
World Wrestling Entertainment posted second-quarter revenue of $281.6 million, a 31% year-over-year increase. That’s the highest revenue in company history, and it topped analysts’ estimates for $239.58 million by 17.5%.
During the second quarter, average paid subscribers increased 10% to 1.8 million, which was in line with WWE’s guidance. Video views also jumped 58% year-over-year to 14.4 billion, while 509 million hours were consumed across digital and social media platforms.
Second-quarter net income nearly doubled to $10 million, or $0.11 per share, compared with $5.1 million, or $0.06 per share, in the second quarter of 2017. The consensus estimate called for second-quarter earnings of $0.16 per share.
But Wall Street shrugged off the earnings miss, and WWE shares opened higher this morning. Here’s why: This was a stunning second-quarter report. Plus, the company expects revenue to continue to rise, thanks in part to average paid subscribers increasing 10% in the third quarter.
Now, WWE is one of my Accelerated Profits trades—and the stock is up nearly 150% in the past seven months for us. But this stock’s run is far from over. With analysts calling for 62.5% earnings growth and 7.5% sales growth for FY 2018, I see plenty of upside potential for WWE. Whether you subscribe to my Accelerated Profits newsletter or not, I recommend WWE as an A-rated Strong Buy.