Walt Disney Company (NYSE:DIS)
Consumer Discretionary - Media | Reports May 10, After Market Closes
Key Takeaways
- The Estimize consensus is looking for earnings per share of $1.46 on $13.41 billion in revenue, 6 cents higher than Wall Street on the bottom line and $160 million on the top
- Disney is seeing huge increases in studio entertainment, thanks to the success of Star Wars and Zootopia this quarter
- Moving forward, Disney must address the problems with cable programming and particularly ESPN
Disney (DIS), is scheduled to report second quarter earnings tomorrow after the market closes. The entertainment giant is coming off a strong Q1 primarily driven by the success of Star Wars: The Force Awakens. The global success of the movie drove revenue growth at both Studio Entertainment and Consumer products which increased 86% and 23%, respectively. This quarter should continue to get a nice bump as the blockbuster was still going strong well into the beginning of 2016. Meanwhile, Disney is seeing strong growth in its parks and resorts while cable networks has begun to struggle.
The Estimize consensus is looking for earnings per share of $1.46 on $13.41 billion in revenue, 6 cents higher than Wall Street on the bottom line and $160 million on the top. Compared to a year earlier profits are expected to rise 18% while revenue could increase as much as 8%. Given its strong earnings of late, it’s not surprising that shares are up 15% on the past 3 months. Historically the stock sees slight improvements leading up and through earnings season.
Last quarter’s earnings got a huge bump from the blockbuster Star Wars movie which hit theatres in mid December 2015. This quarter should see some of those effects but also benefit from the wildly successful animated film, Zootopia. The children’s movie is currently the top grossing movie in 2016, nearing $1 billion in ticket sales as of early May. Meanwhile, the newest Captain America movie released last Friday drew in $180 million in ticket sales for its opening weekend. While Disney won’t see this benefit until next quarter, it should help the entertainment giant to a similar extent that Star Wars has thus far.
Lately parks and resorts have performed just as well as Disney’s studio entertainment. This sector saw revenue increased 9% and operating income climb 21% for Q1 2016. Higher operating income at domestic locations was due to higher average ticket prices and attendance growth. This more than offset the increases in labor costs and new guest offerings incurred in the quarter. With a Star Wars themed attraction set to launch soon, parks and resorts should continue to see stable growth.
Media networks, on the other hand, have been a sour spot for Disney lately. As cord cutting habits run rampant and programming costs continue to increase, cables networks suffer. Last quarter, Disney saw operating income fall 5% in this segment, due to a substantial decline from ESPN. Fortunately for Disney, 2 of its 3 divisions are more than offsetting the marginal declines it is seeing from cable programming.
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