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Walt Disney Q3 Preview: Can Shares Uphold Recent Strength?

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The Zacks Consumer Discretionary Sector has tumbled year-to-date as consumers reign in spending on non-essential items in the face of scorching-hot inflation. However, the sector has outperformed the general market by a fair margin over the last month, undoubtedly a positive.

Below is a table illustrating the sector’s performance over several timeframes compared to the S&P 500.

Zacks Investment Research
Image Source: Zacks Investment Research

A titan in the sector, The Walt Disney Company (DIS - Free Report) , is on deck to reveal Q3 results after the market closes on Wednesday, August 10th.

Disney has assets spanning across movies, television shows, and theme parks. In addition, the company’s premium streaming service, Disney +, has been a major hit among consumers.  

Now that the world is re-opened, how does the company stack up heading into its report? Let’s dive in and take a closer look.

Share Performance & Valuation

Disney shares have really struggled in 2022, losing nearly a third of their value and extensively underperforming the S&P 500.

Zacks Investment Research
Image Source: Zacks Investment Research

However, over the last month, the price action of DIS shares is vividly different; shares have tacked on a stellar 15.5%, easily crushing the general market’s performance.

Zacks Investment Research
Image Source: Zacks Investment Research

In addition, Disney shares trade at high valuation multiples. Its 27.7X forward earnings multiple is well above its five-year median of 24.5X and represents a steep 28% premium relative to its Zacks Consumer Discretionary Sector.

The company carries a Style Score of a C for Value.

Zacks Investment Research
Image Source: Zacks Investment Research

Quarterly Estimates

Analysts have been bullish for the quarter to be reported as of late, with two positive estimate revisions coming in over the last 30 days. Undoubtedly impressive, the $0.94 Zacks Consensus EPS Estimate reflects a rock-solid 17.5% year-over-year uptick in quarterly earnings.

Zacks Investment Research
Image Source: Zacks Investment Research

The growth doesn’t stop there by any means – Disney is projected to have generated a mighty $21.1 billion in revenue throughout the quarter, penciling in a sizable 24% uptick from year-ago quarterly sales of $17.1 billion.

Quarterly Performance & Market Reactions

Disney’s bottom-line results have been mixed as of late, with just two EPS beats over its last four quarters. Just in its latest quarter, the company recorded a 10% bottom-line miss.

Top-line results tell the same story; over its last ten quarterly reports, Disney has exceeded the Zacks Consensus Sales Estimate just five times. Below is a chart illustrating the company’s revenue on a quarterly basis.

Zacks Investment Research
Image Source: Zacks Investment Research

In addition, the market hasn’t necessarily been impressed with Disney’s quarterly results, with shares moving downwards following four of its previous six quarterly prints.

Putting Everything Together

Disney shares have been notably strong over the last month, easily outperforming the S&P 500. However, the company’s valuation levels do appear a bit stretched, with shares trading well above their five-year median.

Analysts have been bullish as of late for the quarter to be reported, and Disney is projected to register serious growth within both the top and bottom-lines.

Quarterly results have been mixed as of late, and the market hasn’t historically reacted well following the company’s previous six quarterly prints.

Heading into the release, The Walt Disney Company (DIS - Free Report) carries a Zacks Rank #3 (Hold) with an Earnings ESP Score of -7.7%.


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