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Disney (DIS) Stock Climbs 1.6% Ahead of Earnings: What To Watch

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Shares of Disney (DIS - Free Report) popped over 1.6% during regular trading hours Monday, just one day before the entertainment powerhouse is set to release its quarterly financial results. So let’s see what investors should expect from Disney’s fiscal Q3 earnings release after the closing bell Tuesday.

Disney is poised to buy vital Twenty-First Century Fox (FOXA - Free Report) assets after Comcast (CMCSA - Free Report) dropped out of the race. The company hopes its acquisition, which features Fox’s film and TV studio, will help it better compete in the age of Netflix (NFLX - Free Report) against Amazon (AMZN - Free Report) and soon enough Apple (AAPL - Free Report) . On top of its streaming TV push, slated for late 2019, Disney has tried to revamp ESPN amid the cord-cutting revolution.

Investors should also be excited that Black Panther, Avengers: Infinity War, and Incredibles 2 all performed very well at the box office, much of which is expected to show up on Disney’s quarterly financial results. With that said, Disney’s quarterly revenues are projected to climb by 8.8% to hit $15.49 billion, based on our current Zacks Consensus Estimate.

Meanwhile, Disney’s adjusted quarterly earnings are expected to surge by over 24.5% to reach $1.97 per share. But we still need to gauge how likely it is that Disney can outperform its earnings estimate. Luckily we can turn to our exclusive Earnings ESP figure to do so.

Zacks Earnings ESP (Expected Surprise Prediction) compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change.

This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

Disney’s Q3 earnings estimate has fallen by $0.08 over the last 30 days, which signals that analysts are less positive about DIS than they were a few months ago. The company’s Most Accurate Estimate—the representation of the most recent analyst sentiment—is calling for earnings of $1.97 per share per share, which is the same as our current consensus estimate.

DIS also currently sports a Zacks Rank #4 (Sell) based on its recent downward earnings estimate revisions trend. Therefore, our model is inconclusive, but Disney has beaten our quarterly earnings estimates in seven out of the last 10 periods.  

Make sure to check back for our full analysis of Disney’s actual results after market close Tuesday.

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