Disney Earnings Preview

Dow component and entertainment titan The Walt Disney Company reveals its fiscal first-quarter earnings after the closing bell on Wednesday 5 February.

With its share price up around 30% in the past year, investors will be expecting quite a lot from Disney, and should it fail to meet estimates the company’s share price could be harshly punished by investors.

The consensus expectation is for earnings of 89 cents per share, excluding certain items that would affect compatibility, which would be up from the 79 cents per share earned in the same quarter last year. Revenues for the quarter are forecast to be $12.23 billion, up from $11.34 billion a year ago, which would be an increase of 7.8% year on year.

Media rival Viacom announced last week that its advertising revenue was up by 4%, driven by stronger ratings, despite an overall decline in revenue, and we might expect the same trend to boost Disney’s ad revenues. This would be significant for Disney as the biggest part of the company by revenue is its Media Networks division, which accounts for around 40% of total revenue, with sports channel ESPN considered the jewel in the crown of the unit, regularly topping the table for US cable primetime viewing ratings.

Also of large significance this quarter, is the Parks and Resorts division, the company’s second-largest unit by revenue, with the Thanksgiving holiday and Christmas period a hugely important season for the various Disney theme parks. We know that consumer spending held up in December in general, despite heavy weather for large parts of the US, and Disneyland and Disney World had predictably fine weather over the quarter.

Though the Studio Entertainment division is not of the same order of importance as Media Networks or Parks and Resorts, it still accounts for around 14% of total revenue. This quarter was not plagued by any sizeable flops (such as The Lone Ranger which affected the fourth-quarter earnings) and included hits in the form of Frozen, Thor: The Dark World and Saving Mr Banks. Frozen is, in fact, the most successful Disney-produced animation of all time, excluding inflation and re-releases, and is still at number two at the US box office after 11 weeks of release.

Disney’s shares have tumbled today along with the wider market: by late in the New York trading session they were down 3.35% at $70.20.

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