Earnings Preview: Disney Q3 2014

Aug. 4.14 | About: The Walt (DIS)

Summary

Walt Disney Co. (DIS) is slated to report 3Q 2014 earnings after the bell on Tuesday, August 5th.

Earnings Per Share Excluding Items: The current Street estimate is $1.16 (range $1.07 to $1.27).

Revenues: Analysts expect an increase of 5.1% y/y to $12.17 bln (range $11.73 bln to $12.60 bln).

By Craig Bowles

Overview

Walt Disney Co. (NYSE:DIS) is slated to report 3Q 2014 earnings after the bell on Tuesday, August 5th. The earnings release is expected at approximately 4:15 p.m. EST followed at 5:00 p.m. with a webcast presentation available through Disney Investor Relations. The media and entertainment giant is also a member of the Dow Jones Industrial Average (NYSEARCA:DIA) and could therefore influence direction of the index futures and other broad market gauges.

Outliers & Strategy

Key measures:

  • Earnings Per Share Excluding Items: The current Street estimate is $1.16 (range $1.07 to $1.27) (Source: Yahoo! Finance). Estimates were increased by 3c during the last three months and Disney has beaten estimates in each of the last four quarters.
  • Revenues: Analysts expect an increase of 5.1% y/y to $12.17 bln (range $11.73 bln to $12.60 bln).
  • Price/Earnings of 22.4 compares to a 5-year average of 17.2; Price/Book 3.4 compares to a 5-year average of 2.1; Price/Sales 3.3 compares to a 5-year average of 2.1, so valuations are relatively rich.
  • Insiders have sold 846,539 shares in the last year but have bought 5,325 shares in the last three months. Disney increased company stock buybacks from $4 bln to $6-8 bln in 2014.
  • Disney is compared to other entertainment companies with quarterly results possibly impacting Viacom (NASDAQ:VIA) and Time Warner (NYSE:TWX).
  • Disney shares have a 1-day average price change on earnings of 3.32%. Options are pricing in an implied move of 2.33% off earnings.

Recent News

  • 08/01 The National Cable Television Cooperative and the Disney & ESPN Networks Group announced a comprehensive multi-year distribution agreement. The cable co-op serves nearly 1,000 member companies across the United States.
  • 08/01 Marvel and Walt Disney's Guardians of the Galaxy (the big gamble on unknown superheroes) exploded out of the gate on Thursday, with $11.2 million, according to a post by the Forbes.com.
  • 07/29 DreamWorks Animation (NASDAQ:DWA) hired Disney veteran Mark Zoradi to be Chief Operating Officer, according to a post on Bloomberg.com.
  • 07/17 Disney 3Q sales are expected to be driven largely by the company's parks and resorts segment and its consumer products segment, according to a post on Fool.com.
  • 07/15 A large options bet was placed on the share price being below $95 in January, according to a post on CNBC.com.
  • 07/15 The NBA wants to double the TV-rights fees it receives from Disney and Time Warner's Turner Broadcasting, according to a post on TheStreet.com.

Technical Review

Disney shares consolidated from the late 1990s to 2012 and have quickly doubled since breaking out. Disney has more than doubled the S&P performance over the last two years, with recent relative strength since February. Current support and resistance is $85-$87. As the stock has been making new all-time highs, the downside worry is a retest of the 200-day moving average. Retests tend to happen in the seasonally weaker second half of the year around October. (Chart courtesy of StockCharts.com)

Summary

Disney analysts remain optimistic and talk glowingly about the company's growth prospects for animation studio content into 2015. The company has ramped up their buyback program which more than offsets any insider selling. The stock normally tests the 200-day moving average once each year and hasn't since late 2012, so seems a little overdue. EPS expectations for the current release have decreased 4c over the last three months despite Disney having beaten estimates the last four quarters and by double digits the last two quarters. While the company isn't expected to beat by a large margin again this quarter, it probably needs to produce above the original analyst consensus of three months ago for a favorable market reaction. Earnings of $1.23 on revenue of at least $12.31 bln would be on the high side of the analysts' range and viewed as an upside surprise.

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