Netflix (NFLX) set to report Q2 earnings: What to expect?

Netflix NFLX is set to report second-quarter 2021 results on Jul 20.

The company forecasts first-quarter earnings to be $3.16 per share. The Zacks Consensus Estimate for earnings has remained stable at $3.16 per share in the past 30 days. The figure indicates 98.7% growth from the year-ago quarter’s reported figure.

Further, total revenues are anticipated to be $7.3 billion, up 18.8% year over year. The consensus mark for second-quarter revenues is currently pegged at $7.31 billion, suggesting 18.9% growth from the figure reported in the year-earlier quarter.

Notably, the company missed the Zacks Consensus Estimate in three of the trailing four quarters, while beating in one. It has a trailing four-quarter negative earnings surprise of 4.96%, on average.

Let’s see how things are shaping up for this announcement.

Factors to Consider
Netflix currently operates in a saturated streaming market in the United States. It is expected to have faced stiff competition from new streaming providers like Disney+ by Disney DIS, HBO Max, Peacock and Apple TV+ by Apple AAPL as well as existing services like Amazon AMZN prime video in the to-be-reported quarter.

The company witnessed sluggish subscriber growth in recent times, primarily due to rising competition. In first-quarter 2021, Netflix added 3.98 million paid subscribers globally compared with the addition of 15.77 million in the year-ago quarter. The company also missed its guidance of 6 million paid-subscriber addition.

Notably, Netflix’s shares have returned 0.4% year to date compared with the Zacks Broadcast Radio and Television industry’s rally of 10.6%.

However, Netflix has been dominating the streaming market driven by its diversified content offering, which is attributable to Netflix’s heavy investments in production and distribution of localized, foreign-language content and an expanding international footprint.

Netflix’s content strength is evident from the fact that it recently received the highest number of Emmy nominations for the second year in a row.

Moreover, Netflix is expected to have benefited from increased consumption of media content especially originals — both movies and TV shows despite partial easing in coronavirus-induced social distancing norms and nationwide.

This Zacks Rank #3 (Hold) company expects to end the second quarter of 2021 with 208.64 million paid subscribers globally, indicating growth of 8.1% from the year-ago quarter’s levels. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for paid memberships at the end of the period is pegged at 208.68 million, slightly better than management’s expectation.

Netflix’s second-quarter 2021 subscriber growth is expected to have been driven by a strong slate of releases that included Oxygen, Skater Girl, Awake, Army of the Dead, Shadow and Bone and The Upshaws.

The Zacks Consensus Estimate for paid total streaming net membership addition is pegged at 1.04 million, slightly better than Netflix’s expectation of 1 million but lower than the year-ago quarter’s reported figure of 10.09 million.

Netflix’s growing popularity in Asia Pacific (APAC) and Latin America (LATAM), thanks to its diversified content offerings in regional languages, is expected to have driven top-line growth.

The consensus mark for second-quarter 2021 APAC revenues is pegged at $786 million, indicating 38.1% growth from the figure reported in the year-ago quarter. Further, the Zacks Consensus Estimate for LATAM revenues is pegged at $865 million, suggesting almost 10.2% growth from the figure reported in the previous quarter.

The consensus estimate for the Europe, Middle East & Africa (EMEA) revenues is pegged at $2.40 billion, suggesting 26.9% growth from the figure reported in the year-ago quarter.

The consensus mark for United States and Canada (UCAN) revenues is at $3.21 billion, indicating 13.2% growth from the figure reported in the previous quarter. Zack’s Equity Research