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Here's What to Expect from Disney's (DIS) Q4 Earnings

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Shares of Disney (DIS - Free Report) rose marginally during regular trading hours Wednesday just one day before the media powerhouse is set to report its Q4 financial results. So, let’s take a look at everything investors should expect from Disney when it reports after the closing bell Thursday.

Disney Overview

Disney’s $71.3 billion deal to purchase major 21st Century Fox (FOXA - Free Report) assets, which include Fox’s film and TV studios, cleared one of its last significant regulatory hurdles Tuesday after European Union authorities approved the deal.

The deal should help Disney fight Netflix (NFLX - Free Report) , Amazon (AMZN - Free Report) , and most likely Apple (AAPL - Free Report) and AT&T (T - Free Report) when the firm launches its stand-alone streaming platform in late 2019. Fox’s film and TV studios will also strengthen the media conglomerate’s box office performance, and even possibly Disney’s theme park offerings. But these benefits aren’t here yet.

 

 

Q4 Revenue Outlook

Our current Zacks Consensus Estimate is calling for Disney’s Q4 revenues to climb roughly 8.1% to reach $13.81 billion. More specifically, investors need to understand what to expect from Disney’s individual business units as they could help determine how DIS stock trades in the near-term.

Disney’s Media Networks unit, which includes cable and broadcast, is projected to see its quarterly revenues climb 4% to $5.688 billion, based on our NFM estimates. We should note that Disney’s largest division jumped 5% in Q3, but dipped 3% in the year-ago quarter.

Meanwhile, the company’s Park and Resorts revenues are expected to jump roughly 11.5% to reach $5.204 billion—unit revenues jumped 6% in both Q3 and the prior-year quarter. Disney’s largest growth is expected to come from its Studio Entertainment unit, which is projected to soar 27.5% to reach $1.826 billion. It is, however, worth remembering that this is Disney’s most volatile segment. Studio Entertainment revenues sunk 21% in Q4 of 2017 and surged 20% last quarter.

Earnings

Now that we have covered Disney’s top-line expectations, it’s time to see what we should expect from the other end of the income statement. Disney’s adjusted quarterly earnings are projected to surge 22.43% to reach $1.31 per share. Still, we need to know if Disney is likely to top our quarterly earnings estimate. Luckily, we can turn to our exclusive Earnings ESP figure to do so.

The 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 is currently a Zacks Rank #3 (Hold) that sports an Earnings ESP of 0.00%. Unfortunately, this means that our model is inconclusive. With that said, Disney has fallen short of quarterly earnings estimates in four out of the last 10 periods, which includes a Q3 miss.

 

Bottom Line

Investors should remember to pay close attention to any ESPN updates, including ESPN+ spending news. Maybe more importantly, any updates from CEO Bob Iger about Disney’s streaming push, positive or negative, could drive the stock in either direction.

Disney is set to report its fiscal 2018 and Q4 financial results after the closing bell Thursday.

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