Don't Be Afraid: AMC Networks Looks Poised to Produce Strong Q2 Results

By Markets Fool.com

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Fear the Walking Dead debuts on Aug. 23. Credit: Frank Ockenfels 3/AMC.

Shares of AMC Networks are up roughly 30%year to date.Will the rally continue, or are worse days ahead? A lot depends on how well the business performs. Here's a closer look at what analysts expect to see when the upstart entertainment network reports second-quarter earnings on Aug. 6:

Q2 Estimates
Revenue
YOY Growth
EPS
YOY Growth

Low estimate

$556.4 million 6.6% $0.83 (3.5%)

High estimate

$633 million 21.2% $0.98 13.9%

S&P CAPITAL IQ CONSENSUS

$592.44 million

13.5%

$0.91

5.8%

Source: S&P Capital IQ.

A beat is to be expected. AMC has reported more profit than Wall Street was targeting in each of the last four quarters, and the gap is widening:

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Earnings History
Q2 2014
Q3 2014
Q4 2014
Q1 2015

Consensus

$0.85

$0.73

$1.01 $1.44

Actual

$0.86

$0.80

$1.15 $1.66

DIFFERENCE

$0.01

$0.07

$0.14

$0.22

Source: S&P Capital IQ.

Looking at the overall business, I'm watching for momentum in each of these four areas:

1. Sustained growth in National Networks ad revenue. National Networks is AMC's largest segment and is responsible for producing and licensing programming for the company's various channels: AMC, IFC, WeTV, and Sundance TV in the U.S. Advertising revenue from U.S. hits such asThe Walking Dead is recorded here. In Q1, ad revenue growth lagged distribution revenue growth. A return to accelerating gains in ad revenue would be a welcome upside surprise.

2. Progress in international distribution. With integration work from the company's 2013 acquisiton of Chellomedia now complete, AMC International is a fully functioning business unit with a signature property in tow:Fear the Walking Dead. That's important. Up to this point, partners have handled overseas distribution for various shows.

3. Strong cash flows. AMC took on $2 billion in debt following its spinoff fromCablevision Systems four years ago and then hundreds of millions more to fund the Chellomedia deal. Consistent cash flow has allowed the company to handle that burden and still invest in new originals. Accelerating gains in this area would be a welcome catalyst for the business and the stock. (Adjusted cash from operations was up 55.1% in the first quarter.)

4. A clear plan for measuring the impact of Fear the Walking Dead. Never before has AMC controlled production and both domestic and overseas distribution for one of its original series. That changes withFear the Walking Dead.Look for management to offer visibility into how success with this showwould affect not just international results but also the overall business.

AMC Networks is scheduled to report Q2 results on Thursday, Aug. 6, before the market opens.

The article Don't Be Afraid: AMC Networks Looks Poised to Produce Strong Q2 Results originally appeared on Fool.com.

Tim Beyersfears the walking dead. Like, a lot. He's also a member of theMotley Fool Rule Breakersstock-picking team and theMotley Fool SupernovaOdyssey I mission. Check out Tim'sweb homeandportfolio holdingsor connect with him onGoogle+,Tumblr, or Twitter, where he goes by@milehighfool.The Motley Fool recommends AMC Networks. The Motley Fool owns shares of AMC Networks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.