Based in Burbank, California, The Walt Disney Company (DIS - Analyst Report) – one of the world’s largest entertainment companies – is scheduled to release its fourth-quarter and full-year 2012 financial results on Thursday, November 8, 2012.
The current Zacks Estimate for the company’s earnings stands at 68 cents, with a low of 61 cents and a high of 71 cents, reflecting an increase of about 15.3% compared with the earnings of 59 cents reported in the prior-year quarter. Revenue, as per Zacks Consensus Estimate is pegged at $10.9 billion.
Third Quarter Recap
Disney delivered strong third-quarter 2012 results, driven by solid performances of Parks and Resorts and the Studio Entertainment business. Its quarterly earnings of $1.01 a share surpassed the Zacks Consensus Estimate of 93 cents and surged 29% from 78 cents earned in the prior-year quarter. However, including one-time items, earnings augmented 31%.
Total revenue came in at $11.1 billion, up 4% year over year. However, it missed the Zacks Consensus Estimate of $11.2 billion. Total segment operating income increased 18% year over year to $3.2 billion.
Agreement of Estimate Revisions
For the to-be-reported quarter, 2 out of 23 estimates were raised while 7 were revised downward over the past 30 days. During the last 7 days, one estimate was moved up, whereas 3 went down for the quarter.
Moreover, for fiscal 2012, over the last 30 days, 2 estimates (out of 26) moved up and 8 estimates went in the opposite direction. During the last 7 days, slight changes were noticed in the estimates with 4 of these going down and no changes were observed in the reverse direction.
We observe that most of the analysts have trimmed their estimates over the last 30 days and 7 days, since the company’s broadcasting and cable ad revenue has been affected by the recent Olympics season during the quarter. As a result, the analysts lowered their growth expectations from advertisement revenue, and in turn the impact was reflected in estimate revisions.
On the other side, some of the firms remain positive based on Disney’s recent acquisition of Lucasfilm Ltd. This acquisition will not only fortify Disney’s position, but will also expand its world-class portfolio of content while driving revenue growth through its multiple platforms.
Magnitude of Estimate Revisions
Due to more negative estimate revisions during the last 30 days, the Zacks Consensus Estimate for the fourth quarter was trimmed down by a penny to 68 cents per share, whereas it remain unchanged over the last 7 days.
Similarly, for the fiscal 2012, the estimates went down by a penny to $3.08 per share in the last 30 days, while no changes were seen in the last 7 days.
Positive Earnings Surprise History
With respect to earnings surprise, Walt Disney has topped the Zacks Consensus Estimate in the last four quarters, in the range of 3.57%–12.68%, with an average of 8.03%.
Neutral on Disney
Walt Disney is one of the world’s largest diversified entertainment companies and commands a formidable portfolio of globally recognized brands, primarily its namesake brand – Walt Disney – followed by ABC, ESPN, Pixar and Marvel Entertainment. These renowned brands offer a strong competitive edge to the company and bolster its well-established position in the market, which is also dominated by players like News Corporation (NWSA - Analyst Report) and Time Warner Inc. (TWX - Analyst Report).
However, we remain concerned about the company’s theme parks business and advertising revenue from broadcasting and cable television, since these are sensitive to macro-economic headwinds.
As a result, we maintain our long-term ‘Neutral’ recommendation on the stock. The company carries a Zacks #3 Rank, which implies a short-term Hold rating for the upcoming 1-3 months.