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Disney earnings preview

Dow component and global entertainment conglomerate The Walt Disney Company reports its fiscal fourth-quarter results after the market on Thursday 7 November.

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The consensus expectation is for earnings of 76 cents per share, which would be up from the 68 cents per share earned in the same quarter last year. Revenues for the quarter are estimated to be $11.4 billion, up from $10.78 billion a year ago.

Disney’s largest division is its Media Networks unit, which contains ESPN, ABC and the Disney channel, and provides a huge chunk of Disney’s overall revenue (roughly 45%).

ESPN is a world leader in sport broadcasting, and in an age when consumers are changing their viewing habits, increasingly in ways that allow them to by-pass adverts, sports remains one of the few types of programming that viewers want to watch live and this allows ESPN to command strong advertising revenues.

Last quarter there were some concerns that the August launch of Fox Sports 1 might provide competition to ESPN and pressure those revenues.

Fox’s challenge failed to amount to much, though, with early ratings making a small plop rather than a splash. In September, ESPN made a pointed announcement on the one-month anniversary date of the launch of Fox Sports 1, revealing a rise in ratings:

‘Since August 17, ESPN has averaged 1,217,000 viewers on a 24-hour basis, up 13% compared to the same four weeks a year ago (1,079,000),' said ESPN's press release. 'In prime time, the network has enjoyed even stronger growth during this time span, rising 20% over 2012 with an average of 2,894,000 viewers (2,417,000 last year).’ If this strong performance is representative of the quarter of the whole, the Media Networks segment of Disney should be in good shape.

The Parks and Resorts unit is Disney’s second-largest segment by revenue. The company hiked ticket prices for both its Disneyland park in California and Walt Disney World in Florida by close to 6% back in June, and CEO Bob Iger reported last quarter that there had been no backlash against these price rises, with attendance rising 3% over the quarter. I will be interested to hear whether this trend has continued and for any updates on when the Avatar-themed park addition to the Animal Kingdom in Walt Disney World will be launched.

The Studio Entertainment segment of Disney suffered a colossal flop in 2012 with its John Carter film and unfortunately it has a similar-sized bomb with its Lone Ranger movie this year, the losses of which will fall in the quarter on which the company is reporting (John Carter was not released in the equivalent quarter in 2012).

Disney wisely got the bad news out early on this, though, letting the market know that the studio was expecting to lose between $160 and $190 million on the Johnny Depp-starring dud. The Lone Ranger grossed $260 million worldwide (only $89 million of which was domestic), against a budget of $215 plus marketing costs. Disney will have taken a smaller cut of international grosses than for domestic, so the range given by Disney last quarter for the loss looks likely to be accurate.

In the plus column, Walt Disney Pictures also had Monster’s University released in many territories this quarter, along with the modestly-budgeted but nicely-performing Planes. Monster’s University substantially out-performed Brave at the box office, the Pixar/Disney-branded animated film from the year before.

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