The Walking Dead Season

The Walking Dead is once again hitting ratings highs. Credit: AMC Networks.

Shares of AMC Networks, (NASDAQ:AMCX) stock entered the week down about 11% year-to-date. Will the slide continue, or are better days ahead? A lot depends on how well the business performs. Here's a closer look at what analysts expect to see when the vacation rentals specialist reports third-quarter earnings tomorrow morning:

Q3 Estimates
Revenue
YoY Growth
EPS
YoY Growth

Low estimate

$486.20 million

22.9%

$0.60

(25%)

High estimate

$521.65 million

31.9%

$0.85

6.3%

S&P CAPITAL IQ CONSENSUS

$508.93 million

28.7%

$0.72

(10%)

Source: S&P Capital IQ.

Despite its rich TV properties, AMC hasn't had much luck beating Wall Street's targets. Don't be surprised if tomorrow morning's report disappoints on the bottom line.

Earnings History
Q3 2013
Q4 2013
Q1 2014
Q2 2014

Consensus

$0.86

$0.78

$1.16

$0.85

Actual

$0.80

$0.53

$0.99

$0.86

DIFFERENCE

($0.06)

($0.25)

($0.17)

$0.01

Source: S&P Capital IQ.

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

1. Ad revenue growth and evidence of pricing power 
Programming from the National Networks segment accounts for the vast majority of AMC's revenue. Unfortunately, in Q3, we don't get to see the benefits of The Walking Dead, which returned to another ratings record after the quarter closed on Sept. 30. Is AMC able to command premium ad rates without the aid of zombies? Last year, ad revenue increased 36.3%year-over-year to $146 million in the third quarter. In this year's Q2, ads accounted for $164 million in revenue -- an 11.3% year-over-year increase. Meaningful gains in ad revenue in an off-quarter would be good news for the stock.

2. Rising content revenue
Like HBO, AMC is no longer merely licensing programming made by other studios. Shows such as The Walking Dead are produced in-house, giving the network an ownership stake that could pay off in syndication and overseas distribution. DVD and Blu-ray sales are also potential catalysts. In Q2, distribution revenue rose 7% to $264 million. Look for further gains as AMC leans on owned properties to deliver ongoing, annuity-like profits.

3. International growth
We're only at the beginning stages of seeing what the Chellomedia acquisition can do for AMC over the long-term. A recent tie-up with BBC America, in which AMC acquired 49.9% of the subsidiary network, should give a boost to overseas ad and affiliate fees. Longer term, it's possible that we'll see new AMC shows make their way to the BBC sooner than they might have otherwise. Listen for CEO Josh Sapan to offer a broad update on AMC's global strategy during the earnings call.

4. An improving development pipeline
A spin-off of The Walking Dead has been greenlit and is in active development. AMC has ordered two seasons of Better Call Saul. Both shows have catalytic potential, but what else is in the pipeline? Again, I'm looking for Sapan to give an update on how many projects AMC has ready for when the network's post-Mad Men era begins next summer.

AMC reports Q3 results tomorrow before the market opens; check back here then for our take on the report. And in the meantime, leave a comment to let us know what you're expecting, and what you think of AMC Networks stock at current prices.

Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Apple, Google (A and C class), and Netflix at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool recommends AMC Networks, Apple, Google (A and C shares), and Netflix. The Motley Fool owns shares of AMC Networks, Apple, Google (A and C class), and Netflix. 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.