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Is a Surprise in Store for Disney (DIS) in Q3 Earnings?
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Media giant – The Walt Disney Company (DIS - Free Report) – is slated to report third-quarter fiscal 2016 results after the closing bell on Aug 9, 2016. In the previous quarter, the company had registered a negative earnings surprise of 2.9%. However, the company has surpassed the Zacks Consensus Estimate in three out of the trailing four quarters, with an average earnings surprise of 4.3%. Let’s see how things are shaping up for this announcement.
Zacks Model Shows Unlikely Earnings Beat
Our proven model does not conclusively show that Disney is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Disney's Earnings ESP is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.61. The company carries a Zacks Rank #3 (Hold), which when combined with ESP of 0.00%, makes a surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
A sturdy movie business due to recent blockbusters and strong performance of its Parks & Resorts division continue to act as catalysts. The success of its movies will also mean solid business for its Consumer Products division as demand for the merchandise associated with successful movies usually skyrockets, as seen in the case of Frozen. On the other hand, the Parks & Resorts division is expected to report robust financial numbers, and may drive the company’s bottom line. Disney is focused on deploying its capital toward expansion of the Parks and Resorts business, thereby increasing its market share and creating long-term growth opportunities.
However, the major concern for Disney is the performance of ESPN. For some time now, declining subscriber count and higher programming costs have been a cause of concern for investors. Disney’s primary cash cow – ESPN – has been under immense pressure as the Pay-TV landscape continues to change owing to migration of subscribers to online TV. Falling subscriptions will have a telling effect on the network’s ad revenues. Moreover, ESPN does not have any major sports contracts, which may increase cable programming and production costs.
With its huge international presence, Disney remains prone to unfavorable foreign currency translations which may have an adverse effect on its top- and bottom-line results. This time around, management cautioned that lack of hedges at favorable rates against forex volatility will squeeze out $500 million from its fiscal 2016 operating income.
Stocks Poised to Beat on Earnings
Here are some companies you may want to consider as our model shows these too have the right combination of elements to post an earnings beat:
Macy's, Inc. (M - Free Report) currently has an Earnings ESP of +25% and a Zacks Rank #2 (Buy).
The Children's Place, Inc. (PLCE - Free Report) currently has an Earnings ESP of +25% and a Zacks Rank #2 (Buy).
The Gap Inc. (GPS - Free Report) currently has an Earnings ESP of +2.13% and a Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Is a Surprise in Store for Disney (DIS) in Q3 Earnings?
Media giant – The Walt Disney Company (DIS - Free Report) – is slated to report third-quarter fiscal 2016 results after the closing bell on Aug 9, 2016. In the previous quarter, the company had registered a negative earnings surprise of 2.9%. However, the company has surpassed the Zacks Consensus Estimate in three out of the trailing four quarters, with an average earnings surprise of 4.3%. Let’s see how things are shaping up for this announcement.
Zacks Model Shows Unlikely Earnings Beat
Our proven model does not conclusively show that Disney is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Disney's Earnings ESP is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.61. The company carries a Zacks Rank #3 (Hold), which when combined with ESP of 0.00%, makes a surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
DISNEY WALT Price and EPS Surprise
DISNEY WALT Price and EPS Surprise | DISNEY WALT Quote
Factors Influencing this Quarter
A sturdy movie business due to recent blockbusters and strong performance of its Parks & Resorts division continue to act as catalysts. The success of its movies will also mean solid business for its Consumer Products division as demand for the merchandise associated with successful movies usually skyrockets, as seen in the case of Frozen. On the other hand, the Parks & Resorts division is expected to report robust financial numbers, and may drive the company’s bottom line. Disney is focused on deploying its capital toward expansion of the Parks and Resorts business, thereby increasing its market share and creating long-term growth opportunities.
However, the major concern for Disney is the performance of ESPN. For some time now, declining subscriber count and higher programming costs have been a cause of concern for investors. Disney’s primary cash cow – ESPN – has been under immense pressure as the Pay-TV landscape continues to change owing to migration of subscribers to online TV. Falling subscriptions will have a telling effect on the network’s ad revenues. Moreover, ESPN does not have any major sports contracts, which may increase cable programming and production costs.
With its huge international presence, Disney remains prone to unfavorable foreign currency translations which may have an adverse effect on its top- and bottom-line results. This time around, management cautioned that lack of hedges at favorable rates against forex volatility will squeeze out $500 million from its fiscal 2016 operating income.
Stocks Poised to Beat on Earnings
Here are some companies you may want to consider as our model shows these too have the right combination of elements to post an earnings beat:
Macy's, Inc. (M - Free Report) currently has an Earnings ESP of +25% and a Zacks Rank #2 (Buy).
The Children's Place, Inc. (PLCE - Free Report) currently has an Earnings ESP of +25% and a Zacks Rank #2 (Buy).
The Gap Inc. (GPS - Free Report) currently has an Earnings ESP of +2.13% and a Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>