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Disney (DIS) to Report Q4 Earnings: What's in the Cards?

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Disney (DIS - Free Report) is slated to report fourth-quarter fiscal 2018 results on Nov 8.

The company’s earnings beat the Zack Consensus Estimate in two of the trailing four quarters, delivering average positive surprise of 4.16%.

In third-quarter 2018, adjusted earnings increased 18.4% from the year-ago quarter to $1.87 per share. Revenues increased 7% from the year-ago quarter to $15.23 billion.

The Zacks Consensus Estimate for fourth-quarter earnings has remained steady at $1.31 over the past seven days, indicating year-over-year growth of 22.4%. The consensus mark for revenues is pegged at $13.81 billion, indicating year-over-year growth of 8.1%.

Let’s see how things are shaping up for this announcement.

The Walt Disney Company Price and EPS Surprise

The Walt Disney Company Price and EPS Surprise | The Walt Disney Company Quote

ESPN+ Success to Boost Subscriber Growth

Disney’s launch of ESPN+ in early April is already proving to be a success as the streaming service recently surpassed one million paying subscribers. Engaging content targeted toward the right audience is likely to drive fourth-quarter 2018 subscriber base.

Notably, ESPN+ offers live major league baseball, national hockey league, boxing, college sports events, and ultimate fighting championship coverage. Disney also noted that it just landed the rights to Italy's Serie A soccer league that will see it stream 340 matches per season on ESPN+ starting this year.

Additionally, with strong conversion rates at ESPN+, from free trials to paid subscriptions, and subscription growth exceeding management expectations, we expect Disney to attract higher ad dollars.

Moreover, increases in affiliate revenues for ESPN in third-quarter 2018 depict its content strength.

Further, Disney’s deal with Activision (ATVI - Free Report) to air the Overwatch League on some of its platforms is helping the former cash in on the growing e-sports market. This move is expected to increase user loyalty, which may translate to higher overall subscribers in fourth-quarter fiscal 2018.

Spending & Ticket Prices Aid Parks & Resorts Revenues

The media giant’s continued investment in Parks & Resorts (34.1% of third-quarter revenues) is reaping benefits.  This is evident from attendance growth at international parks such as Shanghai Disney Resort and Hong Kong Disneyland Resort.

We expect higher guest attendance and increased ticket prices to aid Parks & Resorts segment revenues in fiscal fourth-quarter 2018.

However, increase in programming costs and expenses related to BAMTech are likely to hurt profitability. Moreover, competition from companies like Facebook (FB - Free Report) , Twitter (TWTR - Free Report) and Amazon that are striking back-to-back deals to air live gaming content on their platforms does not bode well for Disney.

Disney currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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