Back to top

Image: Bigstock

Factors to Consider Ahead of Disney's (DIS) Q3 Earnings

Read MoreHide Full Article

Disney’s (DIS - Free Report) third-quarter fiscal 2019 results are expected to benefit from the addition of Hulu and Fox assets and increased attendance level at its theme parks.

The company is set to report third-quarter fiscal 2019 results on Aug 6. It is expected to report solid top-line growth due to the phenomenal success of Avengers: Endgame. However, ongoing investments on ESPN+ and Disney+ are expected to hurt profitability.

Click here to know how Disney’s overall performance is likely to be.

Fox Assets & Hulu to Drive Growth  

The third-quarter results will include the full-quarter contribution from the Twenty-First Century Fox deal and the Hulu ownership for the first time.

Disney completed the acquisition of 21st Century Fox assets on Mar 20. In the last reported quarter, 21st Century Fox contributed revenues of $373 million and operating income of $25 million.
 

The Fox acquisition strengthened Disney’s content portfolio and might have positively impacted the top line. However, management estimates the 21st Century Fox acquisition to have a negative impact of 35 cents on earnings before purchase accounting in the third quarter.

Meanwhile, investors would eagerly watch the performance of Hulu, in which Disney has a 66% stake and the rest is owned by Comcast (CMCSA - Free Report) . Notably, on Apr 15, AT&T (T - Free Report) sold its 10% stake in Hulu for $1.48 billion to Disney.

Hulu’s user base is expanding, courtesy of portfolio strength despite tough competition in the streaming space, which is currently dominated by Netflix (NFLX - Free Report) and AT&T’s HBO.

Disney’s decision to add licensed content to Hulu might have had a positive impact on the top line, owing to the service’s ability to attract users.

Higher Attendance Levels at Theme Parks: A Key Catalyst

Growth in attendance levels at Disney’s theme parks, primarily owing to the Memorial Day weekend (May 27), might have driven the Parks, Experiences & Consumer Products segment’s top line.

Moreover, Disney continues to add new experiences to its theme parks. The company opened “Star Wars: Galaxy’s Edge” at Disneyland in May. This might have boosted customer revisits to the parks.

Further, Disney sells a variety of merchandise centered around popular characters from its strong film slate. The solid performance of Avenger’s Endgame in third-quarter fiscal 2019 might have driven merchandise sales.

The Zacks Consensus Estimate for the segment revenues is pegged at $6.68 billion, indicating growth of 28.7% from the figure reported in the year-ago quarter.

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

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


The Walt Disney Company (DIS) - free report >>

Netflix, Inc. (NFLX) - free report >>

AT&T Inc. (T) - free report >>

Comcast Corporation (CMCSA) - free report >>