Walt Disney Q2 earnings: what to expect for the company's share price?

Walt Disney shares – positive Q2 earnings expected

Walt Disney Co (All Sessions) is set to report its fiscal second quarter 2024 earnings on May 7th.

The entertainment giant has seen its stock price rise by around 22% year-to-date, nearly four times more than the S&P500 but Disney shares could be poised for further gains if the company delivers a strong earnings beat.

Walt Disney versus S&P year-to-date performance

Analysts expect Disney to post earnings-per-share (EPS) of $1.10 for the second quarter, a 18.2% increase compared to the same period last year. Meanwhile, consensus revenue estimates stand at $22.11 billion, representing 1.3% year-over-year growth.

According to LSEG Refinitiv data Walt Disney has a consensus analyst rating of ‘buy’ – 6 strong buy, 19 buy, 4 hold and 2 sell – and a mean of estimates suggesting a long-term price target of $125.54 for the share, roughly 14% higher than the current price (as of 2 May 2024).

Valuation and activist interest

At around 24x forward earnings, Disney trades at a sizable premium to the leisure and entertainment industry average of 16.75x. This lofty valuation leaves little room for error in the upcoming report.

Meanwhile, high-profile activist investor Nelson Peltz has been pushing for board representation to help accelerate Disney's turnaround efforts. Shareholders in early April voted against Peltz’s board seat proposal. However, the activist is unlikely to back down, keeping potential boardroom drama on the radar.

Cost cuts to boost margins

Disney’s management has been aggressively cutting costs to restore profitability. In the previous quarter, the company generated $500 million of cost savings. Management reiterated its target of $7.5 billion in annualized savings by late 2024.

These savings should help expand margins over the coming years. In turn, bottom-line growth could accelerate even if the top line sees only modest gains in the near term.

Parks segment leads growth

Disney’s parks, experiences and products division stands out as the company’s primary growth engine. Total segment operating income surged over 60% last quarter. Parks have seen a huge rebound in attendance following the easing of pandemic headwinds.
Looking ahead, Disney’s robust pipeline of new attractions and experiences should continue to draw visitors. Major upcoming additions include the Avengers Campus expansion and the Star Wars: Galactic Starcruiser hotel.

Meanwhile, the company’s streaming platforms have struggled with subscriber losses and mounting losses. However, as US screenwriter strike-related production delays ease, Disney+ could see engagement and signups pick back up.

With parks firing on all cylinders and streaming investments starting to pay off, Disney looks poised to deliver impressive growth in fiscal 2024 and beyond. A strong earnings report would reinforce the turnaround narrative and could send the stock to new highs.

Walt Disney technical view

The Walt Disney share price saw a stellar 36% rise between January and April and traded at levels last seen in August 2022 before slipping back, in line with the April US stock market decline, by around 10% from its $123.74 recent peak.

Walt Disney Weekly Chart

While the May 2023 peak and the 2023-to-2024 uptrend line at $103.91 to $103.78 hold fast, this year’s uptrend will stay intact.

Better-than-expected earnings as those seen for Q1 results in early February have the potential to push the Walt Disney share price beyond the August 2022 and April 2024 peaks as well as the 200-week simple moving average (SMA) at $123.74 to $126.64 towards the January 2022 high at $160.32.

Walt Disney Daily Chart