What To Expect From Disney’s Q4 Earnings

by Trefis Team
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Disney (NYSE: DIS) is scheduled to announce its fiscal fourth quarter results on Thursday, November 8. In Q3, the company’s earnings per share and revenues missed market expectations, despite solid gains in core segments. The company’s revenue increased 7% year-over-year (y-o-y) to $15.2 billion and operating income grew 5% y-o-y to $5.2 billion. In addition, the company’s adjusted EPS rose 18% y-o-y while free cash flow fell 25% y-o-y to $2.6 billion.

Disney’s stock price has increased slightly over the course of 2018, primarily due to the focus on the company’s new online streaming media service and the acquisition of assets from Fox. Our $120 price estimate for Disney’s stock is slightly ahead of the current market price. Our interactive dashboard Parks And Solid Film Slate To Likely Drive Disney’s Q4 which outlines our forecasts for the company’s fiscal Q4 results. You can modify our forecasts to see the impact any changes would have on the company’s earnings and valuation. We expect Disney to post an increase in earnings and revenue growth rate in Q4, driven by continued growth at Parks & Resorts, particularly internationally (with another operational year of the Shanghai Resort), as well as a healthy film slate.

Media Networks Could Be A Drag In Q4

Disney’s Media Networks revenue for the third quarter grew 5% y-o-y to $6.1 billion, driven by growth in affiliate revenue, offset by a decline in advertising revenues. The segment’s operating income declined 1% y-o-y, as higher results at Broadcasting were offset by a Cable decline and lower equity income. At Cable, operating income was lower in the quarter, as improved results at ESPN were more than offset by a loss at BAMTech – reflecting higher content and marketing costs and ongoing investment in the segment’s technology platform, including costs associated with ESPN+. This trend could likely continue into Q4 as well. Going forward, Disney expects BAMTech’s results to have an adverse impact on Media Networks’ fiscal 2018 operating income of $180 million compared to the prior year. This is $50 million worse than its previous estimates, largely due to increased investment in ESPN+.

Expect Relatively Strong Studio Performance In Q4

In the upcoming earnings release, we expect the studios to benefit from the release of Ant-Man and the Wasp and Incredibles 2. We expect a relatively strong fourth quarter for the company with respect to its Studio Operations and Consumer Products segment, as Ant-Man and the Wasp has already collected more than $200 million at the domestic box office, which is more than the entire studio collection for fiscal Q4 last year.

Parks And Resorts To Boost Results In The Long Run

Disney continues to make enhancements to its parks with the recent opening of the new Toy Story Land at the Shanghai Disneyland. The company also plans to open a new Star Wars Land in 2019 at both the Disneyland and Walt Disney World locations. Overall, we expect Disney’s theme parks to be an important driver for its long-term growth due to its international expansion. In the first nine months of fiscal 2018, the segment’s revenues grew 11% y-o-y and operating income increased 20% y-o-y.

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