Wall Street Weighs In On Disney's Q2 Earnings

Walt Disney Co. DIS reported a big second-quarter earnings beat on Tuesday, although investors don't appear to be too impressed.

Earnings of $1.84 per share and revenue of $14.5 billion handily beat expectations, but the stock was trading down 2 percent on Wednesday. Several Wall Street analysts weighed in on the report.

Voices From The Street

Morgan Stanley analyst Benjamin Swinburne said the second-quarter earnings beat was driven by Parks and Studios.

“The results showcase the strong profit growth potential of Disney's IP-driven segments (Film, Parks) as well as highlight notable improvement at core Media Networks despite some modest dilution from OTT investments,” Swinburne wrote.

Uncertainty With Fox

Bernstein analyst Todd Juenger said it’s very difficult to value Disney given that its Twenty-First Century Fox Inc FOXA buyout is far from a given.

“There is a compelling potential story. But for the next 12-24 months: Deal uncertainty, DTC product uncertainty, investment uncertainty, time value, execution risk, innovator's dilemma – not to mention the hard-to-shake fear that Parks and Studios are awfully ‘peak-like,’” Junger wrote.

B. Riley analyst Bartin Crockett said Disney could potentially offer Sky to Comcast Corporation CMCSA to avoid a bidding war for Fox.

“There is clearly risk here of a bidding war, which is one reason why we recommend Fox as a way to obtain Disney exposure, to hedge the bidding war risk,” Crockett wrote.

GBH Insights head of technology research Daniel Ives said Disney’s results were solid, but investors are squarely focused on the Fox buyout for now.

“This quarter fundamentals take a back seat as the major focus around Disney & Iger will be the Fox acquisition and potential Comcast competing bid coming down the road, streaming endeavors, and the launch/initial data points around the streaming ESPN service recently launched,” Ives wrote.

Ratings and Targets

• Bernstein has a Market Perform rating and $102 target.
• Morgan Stanley has an Overweight rating and $130 target.
• B. Riley has a Neutral rating and $123 target.
• GBH Insights has an Attractive rating and $120 target.

At time of publication, Disney's stock was trading around $99.59.

Related Links:

4 Key Takeaways From Disney's Q2 Print

TV Network Stocks May Have Uneventful Q1 Earnings Season