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Endeavor (NYSE:EDR) reports first-quarter sales below analyst estimates

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Endeavor (NYSE:EDR) reports first-quarter sales below analyst estimates

Global talent agency and entertainment company Endeavor (NYSE:EDR) missed analyst expectations in the first quarter of fiscal 2024, reporting revenue growth of 15.9% year-over-year to $1.85 billion. It reported a GAAP loss of $0.46 per share, compared with a profit of $0.03 per share in the same quarter last year.

Is now the time to buy Endeavor? You will find out in our full research report.

Endeavor (EDR) Q1 2024 Highlights:

  • Income: $1.85 billion vs. analyst estimates of $1.87 billion (small loss)

  • EPS: -$0.46 vs. analyst estimates of $0.23 (-$0.69 miss)

  • Gross margin (GAAP): similarly to the corresponding quarter of last year – 54.4%.

  • Market capitalization: $7.99 billion

“During the quarter, Endeavor benefited from strong demand for our sports and entertainment content, live events and premium experiences,” said Ariel Emanuel, CEO of Endeavor.

Owner of the UFC, WWE and clients including Christian Bale, Endeavor (NYSE:EDR) is a diversified global entertainment, sports and content company known for its talent representation and commitment to the entertainment industry.

Media

The advent of the Internet has changed the way shows, movies, music and information flow in general. As a result, many media companies are now struggling with secular issues as attention shifts to the Internet. Some have made a concerted effort to adapt, introducing digital subscriptions, podcasts and streaming platforms. Time will tell whether their strategies will be successful and which companies will emerge as long-term winners.

Increase in sales

A review of a company’s long-term performance can reveal insight into the quality of its operations. Any company can experience short-term success, but a top-notch company maintains growth for years. Endeavor’s 6.9% annual revenue growth rate over the last four years was weak for a consumer discretionary business.

Strive to achieve total incomeStrive to achieve total income

Strive to achieve total income

As a matter of consumer discretion, a long-term historical view may not include a successful company, a new product, or an emerging trend. That’s why we track short-term results. Endeavor’s 6.5% annual revenue growth over the past two years is in line with four years of revenue growth, suggesting the company’s demand is stable.

We can delve even deeper into the company’s revenue dynamics by analyzing its three most important segments: Events, Sports and Representation, which account for 40.3%, 37% and 18.7% of revenues. Over the past two years, Endeavor’s sports revenues (UFC, EuroLeague) have increased by an average of 40.5% year-over-year, while event revenues (live events) and representations (talent agency WME, IMG Models) have decreased by an average of 3, 8% and 8.6%.

For the quarter, Endeavor’s revenue rose 15.9% year over year to $1.85 billion, lower than Wall Street estimates. Looking ahead, Wall Street expects sales to grow 27.1% over the next 12 months, an acceleration from this quarter.

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Operating margin

Operating margin is an important measure of profitability. This is the portion of revenue remaining after taking into account all basic expenses – from the cost of goods sold to advertising and wages. Operating margin is also useful for comparing the profitability of companies with different levels of debt and tax rates because it excludes interest and taxes.

Endeavor has been profitable for the past two years but has been held back by a large expense base. The average operating margin of 3.5% was paltry for a consumer discretionary business.

Endeavor operating margin (GAAP)Endeavor operating margin (GAAP)

Endeavor operating margin (GAAP)

For the quarter, Endeavor generated an operating profit margin of -16.8%, down 25.4 percentage points from the prior year.

Wall Street expects Endeavor to become profitable within the next 12 months. Analysts expect the company’s LTM operating margin of negative 2.1% to increase to positive 11.5%.

Key takeaways from Endeavor’s first quarter results

We tried to find a lot of strong positives in these results. Operating margin was lower and EPS was lower than Wall Street estimates. Overall, it was an average quarter for Endeavor. Following the filing, the stock remains unchanged and is currently trading at $26.53 per share.

So is it worth investing in Endeavor now? When making this decision, you need to take into account its valuation, business features, as well as what happened in the last quarter. We discuss this in our full, practical research report, which you can read here. It is free of charge.