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One of the highlights of this week’s earnings lineup with be The Walt Disney Company’s (DIS - Free Report) ) fiscal second-quarter results on Wednesday, May 10.
Investors are wondering if the media conglomerate can keep regaining its mojo with Disney shares up +18% year to date to top the Nasdaq’s +16% and the S&P 500’s +8%.
Disney stock is still 19% from its 52-week highs seen last August and now is a good time to gauge if DIS shares are worth buying.
Image Source: Zacks Investment Research
Q2 Preview
Disney’s second-quarter earnings are projected at $0.88 per share, a -18% drop from Q2 2022 EPS of $1.08 a share. On the top line, Q2 sales are expected to be $21.73 billion, up 13% from the prior-year quarter.
Investors will be hoping that Disney can post another better-than-expected quarter on its bottom line and show a consistent illustration that the company is working in the right direction to elevate its profitability margin despite what is still a challenging macroeconomic environment for most companies.
Notably, Disney easily surpassed its Q1 EPS expectations by 43% last quarter. The earings beat was driven by a 21% YoY increase in the Parks, Experiences, and Products segment revenue at $8.7 billion. This led to shares of DIS spiking more than 5% before cooling down and drifting lower in the following weeks. Certainly, more sustainability in Disney’s price movement after reporting its Q2 results is at focus in hopes that this year’s rally can be extended.
Image Source: Zacks Investment Research
IGER & Cost Cutting
In regard to Disney increasing its margins, long-term CEO Bog Iger returned to the helm of the company last November with the initiative to reduce expenses and sustain growth and profitability.
During its last quarterly report and Iger’s first back as CEO, the Disney boss announced the company would cut thousands of jobs and reduce its capital expenditures by $5.5 billion. To the delight of investors, Iger stated the cost-cutting initiatives will make it possible for Disney’s board to approve the reinstatement of its dividend by the end of the year.
Image Source: Zacks Investment Research
Growth & Outlook
Based on Zacks estimates, Disney earnings are projected to jump 14% this year at $4.02 per share compared to EPS of $3.53 in 2022. More impressive, fiscal 2024 earnings are expected to climb another 34% at $5.37 per share.
Total sales are forecasted to be up 8% in FY23 and rise another 6% in FY24 to $95.43 billion. Notably, fiscal 2024 would represent 37% growth from pre-pandemic sales of $69.57 billion in 2019.
Image Source: Zacks Investment Research
Streaming Growth
Like streaming competitor Netflix (NFLX - Free Report) ), Disney will no longer provide guidance for subscriber growth. With that being said, Disney’s ability to add subscribers during the quarter will be at the forefront of its Q2 results.
Specifically, Wall Street is eyeing Disney+ after the streaming service lost 2.4 million subscribers during Q1 amid subscription price hikes. This was the firstly quarterly loss since Disney+ was launched in 2019. Still, a wider loss was expected among Disney+ subscribers last quarter with Disney topping estimates by 3%.
Image Source: Zacks Investment Research
Disney+ had 161.8 million paid subscribers during Q1 and 234.7 million total subscribers when including its ESPN+ and Hulu services. While Disney’s total paid subscribers topped Netflix’s 232.5 million paying members, the company’s Direct to Consumer segment reported a -$1.1 billion loss during Q1 up from -$0.5 billion in the prior-year quarter.
Disney stated the increase in operating loss was due to a higher loss at Disney+ and a decrease in results at Hulu although there were improved results at ESPN+. Direct to Consumer revenue did increase by 13% YoY during Q1 to $5.3 billion.
Improvement in operating costs among the Direct to Consumer segment will make Disney’s stock much more attractive. Longer-term investors are hoping that Disney’s growth among streaming services will eventually lead to massive earnings potential for the company.
Takeaway
Disney stock currently lands a Zacks Rank #3 (Hold) going into its fiscal second-quarter report. There could certainly be more upside in Disney stock from current levels but Q2 results will need to start reaffirming CEO Bob Iger’s initiative of cutting costs and sustaining growth and profitability.
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Time to Buy Disney Stock as Earnings Approach?
One of the highlights of this week’s earnings lineup with be The Walt Disney Company’s (DIS - Free Report) ) fiscal second-quarter results on Wednesday, May 10.
Investors are wondering if the media conglomerate can keep regaining its mojo with Disney shares up +18% year to date to top the Nasdaq’s +16% and the S&P 500’s +8%.
Disney stock is still 19% from its 52-week highs seen last August and now is a good time to gauge if DIS shares are worth buying.
Image Source: Zacks Investment Research
Q2 Preview
Disney’s second-quarter earnings are projected at $0.88 per share, a -18% drop from Q2 2022 EPS of $1.08 a share. On the top line, Q2 sales are expected to be $21.73 billion, up 13% from the prior-year quarter.
Investors will be hoping that Disney can post another better-than-expected quarter on its bottom line and show a consistent illustration that the company is working in the right direction to elevate its profitability margin despite what is still a challenging macroeconomic environment for most companies.
Notably, Disney easily surpassed its Q1 EPS expectations by 43% last quarter. The earings beat was driven by a 21% YoY increase in the Parks, Experiences, and Products segment revenue at $8.7 billion. This led to shares of DIS spiking more than 5% before cooling down and drifting lower in the following weeks. Certainly, more sustainability in Disney’s price movement after reporting its Q2 results is at focus in hopes that this year’s rally can be extended.
Image Source: Zacks Investment Research
IGER & Cost Cutting
In regard to Disney increasing its margins, long-term CEO Bog Iger returned to the helm of the company last November with the initiative to reduce expenses and sustain growth and profitability.
During its last quarterly report and Iger’s first back as CEO, the Disney boss announced the company would cut thousands of jobs and reduce its capital expenditures by $5.5 billion. To the delight of investors, Iger stated the cost-cutting initiatives will make it possible for Disney’s board to approve the reinstatement of its dividend by the end of the year.
Image Source: Zacks Investment Research
Growth & Outlook
Based on Zacks estimates, Disney earnings are projected to jump 14% this year at $4.02 per share compared to EPS of $3.53 in 2022. More impressive, fiscal 2024 earnings are expected to climb another 34% at $5.37 per share.
Total sales are forecasted to be up 8% in FY23 and rise another 6% in FY24 to $95.43 billion. Notably, fiscal 2024 would represent 37% growth from pre-pandemic sales of $69.57 billion in 2019.
Image Source: Zacks Investment Research
Streaming Growth
Like streaming competitor Netflix (NFLX - Free Report) ), Disney will no longer provide guidance for subscriber growth. With that being said, Disney’s ability to add subscribers during the quarter will be at the forefront of its Q2 results.
Specifically, Wall Street is eyeing Disney+ after the streaming service lost 2.4 million subscribers during Q1 amid subscription price hikes. This was the firstly quarterly loss since Disney+ was launched in 2019. Still, a wider loss was expected among Disney+ subscribers last quarter with Disney topping estimates by 3%.
Image Source: Zacks Investment Research
Disney+ had 161.8 million paid subscribers during Q1 and 234.7 million total subscribers when including its ESPN+ and Hulu services. While Disney’s total paid subscribers topped Netflix’s 232.5 million paying members, the company’s Direct to Consumer segment reported a -$1.1 billion loss during Q1 up from -$0.5 billion in the prior-year quarter.
Disney stated the increase in operating loss was due to a higher loss at Disney+ and a decrease in results at Hulu although there were improved results at ESPN+. Direct to Consumer revenue did increase by 13% YoY during Q1 to $5.3 billion.
Improvement in operating costs among the Direct to Consumer segment will make Disney’s stock much more attractive. Longer-term investors are hoping that Disney’s growth among streaming services will eventually lead to massive earnings potential for the company.
Takeaway
Disney stock currently lands a Zacks Rank #3 (Hold) going into its fiscal second-quarter report. There could certainly be more upside in Disney stock from current levels but Q2 results will need to start reaffirming CEO Bob Iger’s initiative of cutting costs and sustaining growth and profitability.