Walt Disney share price: what to expect from Q1 results

Investors are expecting a softer start to the year in terms of earnings for Walt Disney Co., as a tough comparable quarter combines with investment and licensing spends to weigh on group earnings.

Disney Source: Bloomberg

The Walt Disney Company Technical analysis Earnings before interest, taxes, depreciation, and amortization Net income Revenue Star Wars

When is Disney’s earnings date?

Disney, listed on the New York Stock Exchange (NYSE), is the largest media and broadcasting company in the world. The company is set to report its first quarter (Q1) earnings for 2019 on Tuesday 5 February 2019.

Disney Q1 2019 earnings: What does Wall Street expect?

Markets are expecting to see Q1 2019 results softer than the prior year’s comparable period (Q1 2018).

The theatrical business will find a tough comparative in terms of extremely high grossing releases in Q1 2018. These releases include, Star Wars: The last Jedi, Thor Ragnarok and Coco. Encouragingly, though, this financial year (FY19) has several blockbuster titles still to follow – namely Avengers: End Game, Aladdin, Toy Story 4, Captain Marvel, Mary Poppins Returns and The Lion King.

Investment spend on the online sports streaming service ESPN+, as well as the online entertainment streaming service Disney+, due to launch later in 2019, is expected to weigh further on the group’s operating income.

The broadcasting business is also expected to see a near double digit cost increase due to licensing and the timing of college football finals over the period.

The suggestion is that operating income will see a combined $700 million decline attributable to the theatrical and streaming businesses. The broadcasting business expense is expected to have increased by 9% over the quarter.

Bloomberg research on Disney arrives at the following consensus estimates for the Q1 2019 results:

  • Earnings per share (on an adjusted basis) $1.56
  • Earnings per share (GAAP+) $1.56
  • Revenue $15.132 billion
  • Net Income (on an adjusted basis) $2.367 billion
  • Operating profit $3.45 billion
  • Earnings before interest, tax, depreciation and amortisation (EBITDA) $4.076 billion

How to trade Disney’s Q1 earnings

The below two graphics provide traders with both a retail short-term view on the stock, as well as an institutional longer-term view on the company, as to how market participants are positioning themselves on Disney ahead of the results release.

Broker ratings

Broker Ratings chart

Broker Ratings chart

A Thomson Reuters poll of 25 analysts maintain a long-term average rating of buy for Disney, as of 31 January 2019, with 7 of these analysts recommending a strong buy, 9 recommending a buy, 7 hold, 1 sell and 1 strong sell recommendation on the stock.

Client sentiment

Client sentiment chart

Client sentiment chart

From a retail trader perspective, as of 31 January 2019, 94% of IG clients with open positions on Disney expect the price to rise over the near term, while 6% of IG Clients with open positions expect the Amazon price to fall.

Disney share price: technical analysis

Technical analysis

Technical analysis

A chart highlighting the last three to four years of share price activity shows Disney to be trading in a non-directional broad range between levels $88.50 and $120.30. The price is currently trading above the mid-point of this range suggestive of perhaps a slight bullish bias to the price action, although this is not considered high conviction.

Technical analysis 2

Technical analysis 2

Zooming into the daily chart, we see the price consolidating after a sharp move higher (see dotted red trend line). The consolidation (highlighted in white) resembles that of a bullish flag formation. In the current context the flag shows a slow move down after an aggressive move up, suggesting that the momentum for the Disney price action remains positive. The suggestion is that the preceding uptrend which occurred before the flag’s formation may be readying itself to be continued.

Wait for a long signal on the Disney share price

Traders of this chart pattern might wait for a long signal to be triggered with a break above the resistance of the flag (should it occur). The breakout suggests that the preceding uptrend is continuing. Should the breakout occur, traders might consider using a stop loss for the trade at a price close below the support of the flag pattern.

Disney results: what to expect

  • Estimates on Q1 2019 are an underperformance on the prior year’s comparative period (Q1 2018)
  • Theatrical releases in the prior year’s comparative period prvide a tough base of comparison
  • High grossing titles are scheduled for release in the remainder of FY19
  • Further investments in online streaming services (ESPN+ current and Disney+ future) will further reduce operating income
  • Broadcasting services will see a rise in expenses
  • An aggregate of broker ratings (by Thomson Reuters) suggest Disney is an investment buy
  • Client sentiment suggests that short term traders are predominantly long the stock
  • A technical analysis view suggests the company to be non-directional in the longer term

In the short term, breakout traders might consider a bullish flag pattern on the stock waiting for an upside breakout to confirm long entry

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