Investors in World Wrestling Entertainment (NYSE:WWE) have been flying from the top rope. The sports entertainment company has absolutely crushed the market so far in 2018, soaring 170% compared to the S&P 500's maudlin gain of just 2%. A couple of key announcements earlier this year have driven WWE's stock into the stratosphere, as fears of wrestling's declining popularity have been largely discounted.
With that type of performance, investors will be watching closely for any signs of weakness when WWE reports its third-quarter financial results on Thursday, Oct. 25 before the market open. Let's review its most recent quarter and several recent announcements to see of the company can maintain its high-flying ways, or if it's about to get tossed out of the ring.
A winning team
Despite high expectations going into its second quarter, WWE lived up to the hype. The company reported record revenue of $281.6 million, an increase of 31% year over year and powering past analysts' consensus estimates for an increase of 11.6%. That resulted in adjusted operating income before depreciation and amortization (OIBDA) of $43.5 million, up 79% year over year, and earnings per share of $0.11, which soared 83% compared to the prior-year quarter.
WWE's growth came largely from television agreements to broadcast its programming, while revenue from live events was nearly breakeven. Revenue from the media segment increased 48% year over year, while consumer product sales increased by 9%. Average paid subscribers increased to 1.8 million, up 10% compared to the prior-year quarter.
Several big announcements last quarter helped boost the stock over the top rope. WWE inked five-year broadcast deals with both Twenty-First Century Fox and Comcast. Fox signed on the dotted line for SmackDown Live, while Comcast-owned USA Network penned a similar agreement for Monday Night Raw. While none of the parties have officially confirmed the terms, the Fox deal is thought to be worth more than $1.025 billion, while Comcast's NBCUniversal is reportedly shelling out $265 million per year -- with the two deals topping $2.35 billion over five years.
Is there a win in the future?
WWE has had a few announcements this quarter as well, but not on the magnitude of last quarter's revelations. The company extended long-standing agreements with Australia's Foxtel and Nine networks to continue broadcasting Raw and SmackDown, as well as a number of other pay-per-view events that will be shown on Foxtel Now.
For the third quarter, WWE is forecasting adjusted OIBDA in a range of $30 million to $34 million. The company raised its guidance for the year and is expecting adjusted OIBDA between $160 million to $170 million, and average paid subscribers of 1.67 million, up 10% compared to last year.
While long-term investors shouldn't be beholden to short-term views of Wall Street mavens, they can help provide context. For their part, analysts' consensus estimates are calling for revenue of $201.61 million, up 8.2% year over year, and earnings per share of $0.19, down 32% compared to the prior-year quarter.
WWE has had a blockbuster year so far, and with its stratospheric rise, it's hard to see how the wrestling company can up its game any further -- and with a price-to-earnings (P/E) ratio north of 100, its frothy valuation may drag the stock down if its results are anything less than show-stopping.