WWE Pops Higher On Earnings Beat, $500M Buyback

World Wrestling Entertainment, Inc. WWE stock whipsawed Thursday morning after the company reported record fourth-quarter earnings and announced a $500-million share buyback program.

What Happened

WWE's Q4 was highlighted by a record $930.2 million in revenue and $114.5 million in operating income. WWE also reported 1.59 million paid WWE Network subscribers, up 7 percent. Finally, WWE announced a new $500-million share buyback program to complement its 0.6-percent dividend.

Why It’s Important

Q4 revenue was up 29 percent, operating income nearly doubled from a year ago and network subscriber growth was in-line with guidance and consensus expectations. WWE delivered yet another quarter of impressive overall growth and continues to be a model for sports leagues transitioning to a digital distribution model.

WWE’s “other” segment revenue more than tripled in Q4, likely getting a big boost from the company’s controversial Crown Jewel event in Saudi Arabia.

Big jump in Q2 2018 was due to payment from Saudi government for Greatest Royal Rumble. Today's press release doesn't make it clear if Q4 2018 includes money from Crown Jewel and Australia's Super Show Down or just Crown Jewel. $WWEhttps://t.co/EhqRmF9E66 pic.twitter.com/Xc22noMgzQ

— Brandon Howard Thurston (@BrandonThurston) February 7, 2019

The buyback announcement was a pleasant surprise for WWE investors.

“We believe we can continue to invest for future growth, maintain financial flexibility and return excess capital to shareholders, all of which should keep us on the path toward building long-term value,” co-president George Barrios said Thursday.

In recent months, analysts have said WWE’s impressive run over the past two years still has legs.

In January, KeyBanc Capital Markets analyst Evan Wingren said WWE has several near-term catalysts ahead beyond the Q4 print. 

There’s been no new news on WWE’s U.K. TV deal renewal or the India TV renewal, both of which are expected to occur in the first half of 2019.

“International renewals in several countries, new content opportunities and digital subscriber growth can continue to drive guidance higher, while its multiple has potential to move higher as the company gives more commentary on investment in 2019 and beyond,” Wingren wrote.

The WWE brand remains healthy, and a 6-percent decline in linear U.S. TV viewership for “Monday Night Raw” implies share gains in a secularly declining linear market, the analyst said. 

What’s Next

WWE stock traded mostly flat in a volatile trading session on Thursday morning and was up 1.49 percent at $80.95 at the time of publication. 

Some investors took the opportunity to take profits on the stock’s 131-percent one-year gain. Others chose to hang onto their shares in anticipation of TV deal announcements from the U.K. and/or India, likely in the next several months.

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Photo courtesy of WWE.