Disney Q3 Earnings Preview: Disney+ Subscribers, Price Hikes In Focus, Could Box Office Success Rally Shares?

The recent box office success of The Walt Disney Company DIS and its Disney+ streaming platform will likely be the most talked about items from the company’s third-quarter earnings, which come before market open Wednesday August 7.

Earnings Estimates: Analysts expect Disney to report third-quarter revenue of $23.11 billion according to data from Benzinga Pro.

The company reported revenue of $22.33 billion in last year's third quarter and has missed analysts' estimates for revenue in four straight quarters.

Analysts expect the company to report third-quarter earnings per share of $1.20 compared to $1.03 reported in last year's third quarter. The company has beaten analysts' estimates for earnings per share in four straight quarter.

Disney reported earnings per share of $1.22 and $1.21 in the first two fiscal quarters respectively, which could make the third quarter the lowest total.

What Analysts Are Saying: Disney's content slate shows signs of a turnaround with Bob Iger at the helm as CEO, Bank of America analyst Jessica Reif Ehrlich said in a July investor note.

The analyst said Iger made two critical changes with a restructuring of divisions to put control back in the hands of creative executives and putting an emphasis on quality content over quantity.

Ehrlich said the box office performance of "Inside Out 2" may have indicated the turnaround has begun with the $1 billion milestone hit. A balance of originals and strong IP is seen in the upcoming content slate, the analyst said.

"Excitement around upcoming titles including ‘Deadpool & Wolverine,' ‘Moana 2' and ‘Mufasa: The Lion King' give us cautious optimism that DIS' studio will continue to improve," Ehrlich said.

Outside of the box office, the analyst sees Disney's Experiences segment as a "key long-term driver" for the company. The segment generates steady profits and has improving margins for international parks, Ehrlich said.

"DIS has a collection of best-in-class premier assets (in content/IP as well as Theme Parks)."

Here are other recent analyst ratings for Disney and their price targets:

Morgan Stanley: Maintained Overweight rating and lowered the price target from $130 to $110
Loop Capital: Maintained Buy rating and lowered the price target from $139 to $130
Needham: Reiterated Buy rating and $145 price target
MoffettNathanson: Maintained Buy rating and lowered the price target from $130 to $125

Key Items to Watch: The box office performance for Disney in recent months will likely be a key topic for the Q3 results and for what's next.

In its first 19 days of release, "Inside Out 2" grossed $469 million domestically and more than $1 billion worldwide. The film helped Disney pass the $1 billion milestone that none of its films hit 2023, ending a long streak.

Also released in the third quarter was "Kingdom of the Planet of the Apes," which ranks ninth domestically and eighth worldwide with box office totals of $171 million and $397 million respectively.

Another topic during the earnings release and conference call will likely be the success of "Deadpool & Wolverine," which was released in July and will be part of fourth-quarter results.

The movie has grossed $395 million domestically and $824 million worldwide, setting many records for an R-rated film and on its way to also pass the $1 billion milestone.

The rebound of Disney' box office performance could be a key topic and also comes ahead of other 2024 releases like "Mufasa: The Lion King" and "Moana 2."

Investors and analysts will also want to hear about Disney's direct-to-consumer segment that includes Disney+.

Disney ended the second quarter with 117.6 million core Disney+ subscribers, while also sharing that it would crackdown on password sharing. The company is also increasing prices for its ad-supported tier from $7.99 to $9.99 and its ad-free tier from $13.99 to $15.99, as reported by The Hollywood Reporter Tuesday.

The price increase comes around a year after the company last announced an increase that went effective in October that impacted ad-free tiers. The new increase hits multiple plans and could be a key topic of discussion.

DIS Price Action: Disney shares are up 3% to $90.57 on Tuesday versus a 52-week trading range of $78.73 to $123.74. The Benzinga Pro chart below shows Disney shares are trading flat year-to-date in 2024.

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