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Walt Disney Earnings Preview: What to Expect
Stock Analysis & Ideas

Walt Disney Earnings Preview: What to Expect

The Walt Disney Company (DIS) is set to release third-quarter fiscal 2021 earnings on August 12.

The Walt Disney Company is an American multinational media and entertainment conglomerate. Over the past year, shares of the company jumped 34.4%, and are now trading at over $177.

A solid fiscal Q3 results might propel the stock price upward, so let’s take a closer look at what analysts on the Street are expecting.

Fiscal Q3 Projections

For Q3, the Street expects Walt Disney to report adjusted EPS of $0.56 and revenues of $16.81 billion.

Meanwhile, the Earnings Whisper number, or the Street’s unofficial view on earnings, stands at $0.91 per share. (See DIS Dividend Date and History on TipRanks)

Walt Disney’s Prior Quarter Snapshot

The company posted mixed second-quarter results, with revenues down year-on-year, but an increase in net income.

Revenues decreased 13% year-on-year and were slightly below the consensus estimate of $15.86 billion to $15.6 billion. The company’s top-line growth was hampered by the shutdown or reduction of operating capacities at theme parks, Disneyland Resort, and the company’s cruise division.

Meanwhile, non-GAAP diluted EPS improved 32% year-over-year to $0.79 per share and came in ahead of consensus estimates of $0.26 per share.

What to Watch for in Walt Disney Earnings

There is no doubt that the epidemic affected Disney’s operations significantly. The company’s top and bottom lines were both hurt by the closing of theme parks, theaters, and resorts.

Nevertheless, the mass media and entertainment conglomerate has been witnessing recovery in its business operations as a result of the ongoing rollout of the vaccine and the government’s progressive removal of restrictions.

In the last earnings call itself, Disney’s CEO Bob Chapek said that the recovery is “clearly reflected in the reopening of our theme parks and resorts, increased production at our studios, the continued success of our streaming services, and the expansion of our unrivaled portfolio of multiyear sports rights deals for ESPN and ESPN+.”

Investors should take note that despite the CEO’s upbeat remarks regarding the company’s continued recovery, the delta variant could be a sore point.

Investors will be closely monitoring to see whether the company will be able to witness a jump in its revenues with the re-opening of the theme parks and theaters. Also, at a time when streaming services are gaining traction, investors should keep an eye on Disney’s streaming service subscriber growth data.

In Q2, Disney’s streaming services, which including Disney+, ESPN+, and Hulu, all saw an increase in paid subscribers.

Notably, at the end of Q2, Disney+, ESPN+, and Hulu each had 103.6 million, 13.8 million, and 41.6 million subscribers, which increased 209%, 75%, and 30% year-over-year, respectively.

Furthermore, Disney is working to increase content creation in theaters and on streaming platforms. The studio launched a variety of films in fiscal Q3, including Cruella in May and Pixar’s Luca in June. Black Widow and Disney’s Jungle Cruise were released in theatres and on Disney+ in July.

As a result of its extensive content inventory, Disney is likely to have attracted new subscribers and retained existing ones, resulting in top-line growth.

Coming to Disney’s theme parks business, revenues in this segment fell 44% year-on-year to $3.2 billion, as the majority of its theme parks around the world were closed or operated at a reduced capacity. Moreover, the sailings of cruise ships were suspended, adding to their woes. 

Now that the disruption appears to be coming to an end, Disney is expected to have generated revenues in this segment to some extent. Reduced capacity due to rigorous social-distancing standards, on the other hand, is likely to hurt occupancy at its theme parks, resulting in lower top-line growth.

On the flip side, investors should be aware that the company’s operational expenses may increase in the near future. DIS said that it intends to spend an additional $1 billion in FY21 to “address government requirements and implement safety measures for our employees, talent, and customers.”

Analysts’ Opinions on Walt Disney

On July 14, Ivan Feinseth of Tigress Financial reiterated a Buy rating and initiated a price target of $227 on the stock. This implies 28.2% upside potential to current levels.

Feinseth remains optimistic about the company’s fundamentals and stated that, “DIS performed well during the pandemic and remains well-positioned to benefit from the postpandemic recovery.”

On July 12, another analyst J.P. Morgan analyst, Alexia Quadrani, reiterated a Buy rating on the stock with a $220 price target (24.2% upside potential).

Quadrani believes that the current level represents a good entry point for long-term investors.

Overall, consensus among analysts is a Strong Buy based on 17 Buys and 3 Holds. The average DIS price target of $210.67 implies 19% upside potential from the current levels.

TipRanks data shows that financial blogger opinions are 89% Bullish on DIS, compared to a sector average of 69%.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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