Media giant The Walt Disney Company DIS is set to report third-quarter financial results after the market close Wednesday.
Here are the earnings estimates, analyst ratings and key items for investors to watch.
Earnings Estimates: Analysts expect Disney to report revenue of $21.82 billion in the third quarter, according to data from Benzinga Pro.
The company reported revenue of $19.25 billion in the corresponding quarter last year and reported revenue of $23.51 billion in the second quarter of the current fiscal year.
Disney has beaten analyst revenue estimates in seven of the last eight quarters.
Analysts expect Disney to report third-quarter earnings per share of 97 cents. The company reported earnings per share of $1.09 in the third quarter of last year and reported earnings per share of 93 cents in the second quarter of the current fiscal year.
The company has beaten earnings per share estimates in four of the last six quarters and matched the estimates in the last reported quarter.
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Disney Analyst On Sidelines, Eyes Weakness In Ads, DTC, Box Office: Disney analysts have been lowering price targets ahead of the third-quarter report.
Macquarie analyst Tim Nollen is among the analysts lowering their expectations for Disney shares, taking the price target from $103 to $94 in a July note.
Nollen has a Neutral rating on the stock that came after a May downgrade.
Nollen named weakness in television advertising, direct-to-consumer declines, soft Parks trends in the quarter and the impact of the Hollywood strike by writers and actors as contributors to his lower EPS estimates and price target.
“Disney has spoken of DTC losses stepping down again by $100m sequentially, and the booking of as much as $1.9bn in impairment charges as it struggles to get this division to its target of break-even by FY’24,” Nollen said.
“F3Q sub trends will likely be negative again, both in the US and abroad.”
The analyst also mentioned a weakened box office for Disney, with “Elemental” and “Indiana Jones and the Dial of Destiny” underperforming.
The impact of the Hollywood strike remains a giant question mark for Disney.
“Content production is now halted due to WGA and SAG-AFTRA strikes, threatening production plans until resolved,” Nollen said.
Walt Disney World traffic concerns also weigh on the analyst's view.
Another item Nollen said to watch is any asset sale discussion by the company.
“Any asset divestiture, as discussed in the FT and elsewhere, could raise cash helpful to buy in the Hulu stake, but could also mark a dramatic change in the portfolio that has made Disney so successful til now.”
Other analyst price target updates in July included:
Morgan Stanley analyst Benjamin Swinburne reiterated an Overweight rating and lowered the price target from $110 to $105.
Atlantic Equities analyst Hamilton Faber downgraded shares from Neutral to Underweight and lowered the price target from $113 to $76.
Evercore ISI Group analyst Vijay Jayant reiterated an Overweight rating and lowered the price target from $130 to $110.
Wells Fargo analyst Steven Cahall reiterated an Overweight rating and maintained a $147 price target.
Key Items To Watch: Among the key items for Disney in the third quarter will be its direct-to-consumer segment, which includes Disney+ and other streaming platforms.
In the second quarter, Disney reported 46.3 million domestic and 157.8 million overall Disney+ subscribers, and both figures were lower than in the first quarter.
The company reported a 2% quarter-over-quarter increase in ESPN+ subscribers in the second quarter and flat growth for Hulu, which stood at 48.2 million subscribers.
One plus from the company in the second quarter: average revenue for Disney+ subscribers increased both domestically and overall.
Investors will be watching to see if Disney+ lost subscribers once again.
As mentioned in the note from Nollen, Disney has had a harder time than expected at the box office.
In fact, as reported recently by Benzinga, Disney may fail to have a $1-billion movie worldwide for the first time since 2014, not counting the 2020 and 2021 COVID-19 pandemic years.
Disney released several hits during the second quarter, but investors may be anxious to hear about the poor results of several movies that came out late in the third quarter or in the fourth quarter and could impact the fourth quarter more.
In the third quarter, Disney released the following films, with the theatrical gross via BoxOfficeMojo:
“Guardians of the Galaxy Vol. 3”: $358.9 million domestically, $845.4 million worldwide.
“The Little Mermaid”: $297.1 million domestically, $566.6 million worldwide.
In the fourth quarter, Disney’s releases that have underperformed include:
“Indiana Jones and the Dial of Destiny”: $170.7 million domestically, $368.8 million worldwide.
“Elemental”: $148.4 million domestically, $424.9 million worldwide.
“The Haunted Mansion”: $42.3 million domestically, $60.3 million worldwide.
Discussion from the company on the success or failure of these movies could be monitored by investors. Disney also has two potential hits coming later in the calendar year with “The Marvels” and “Wish” both expected in November.
Benzinga's Take: While Disney CEO Bob Iger likely won’t talk specifics of any potential asset sales and will say the company is looking for a partner for ESPN, the wording and any follow-up questions from analysts could be interesting with rumors afloat of non-core assets being up for sale.
Some analysts and experts have said Apple Inc AAPL is a likely candidate to buy Disney or acquire a portion of the company if Iger and the board are interested in selling.
Iger recently had his contract renewed, which led to increased speculation that he was brought on to negotiate a sale and stay through its completion.
"Indiana Jones and the Dial of Destiny" still courtesy of Disney.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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