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Overview

Walt Disney (DIS) is scheduled to report 1Q 2012 earnings after the closing bell on Tuesday, February 7. The release will be followed with a conference call at 5:00 p.m. EST. 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:

  • Walt Disney typically produces a value for the measure 'Earnings Per Share Excluding Items.' Traders should therefore "listen" for this value as it is the figure that compares with consensus estimates.
  • Revenue is another critical measure that typically impacts the direction of trading.
  • Walt Disney is expected to earn $0.71 per share (range is $0.66 to $0.76), up from $0.68 a year ago, while revenue is forecast to come in at $11.2 billion, up 4.5% from the prior year. (Source: Yahoo Finance)
  • At a recent $40.00, Disney is trading at just 12 x forward earnings, roughly in line with the 5-year growth rate, resulting in a FWD PEG ratio of just 1.10. The shares also fetch just 1.75x sales.
  • Back on November 30, Walt Disney declared an annual cash dividend of $0.60 per share, up 50 percent, or $0.20 per share, from the previous year. The shares are now yielding 1.50%.
  • Keep an eye on advertising revenue this quarter. Rival Viacom (NASDAQ:VIA) reported last week that ad revenue decreased 3%, due to lower ratings and softness in the U.S. advertising market in the second half of the quarter.

Recent News

  • 01/24: Citigroup maintained a Buy rating and a $42 price target on Walt Disney, according to a post on Benzinga.com. The company also maintained FY2012 & FY2013 earnings estimates. Citigroup reportedly noted that attendance at East Coast & West Coast resorts was in-line with expectations.
  • 01/10: Barclay's Capital downgraded Walt Disney from Overweight to Equal-Weight, according to a post on StreetInsider.com. The company maintained a $44 price target.
  • 01/04: Comcast (CMCSA) and Walt Disney announced a long-term, comprehensive distribution agreement that will deliver Disney's content to Comcast's Xfinity TV customers into the next decade.
  • 12/14: Morgan Stanley reiterated an Overweight rating and a $44 price target on Walt Disney, according to a post on Benzinga.com. The reportedly cited solid EBIT growth and a favorable multiple for the upbeat outlook.

Technical Review

Walt Disney shares have been on an impressive run since last October, up more than 40% over that span. After failing to break through the $40 resistance barrier earlier this month, that level becomes more significant when the company delivers its 1Q 2012 earnings release. Above $40, the next resistance barrier is the 52-week high at $43.61. Conversely, support is at $38, just above the 50-Day SMA, followed by $37.

(Click chart to expand)

(Chart courtesy of StockCharts.com)

Summary

Walt Disney shares are up about 20% over the past three months, benefiting from growth in the film and entertainment business, coupled with solid trends at its theme parks. The shares also trade at a modest 12x forward earnings, a slight discount to CBS Corp. (CBS). However, there is some concern that advertising revenue in the key North America market may have tailed off in the second half of the quarter, after Viacom said it experienced softness in the U.S. advertising market. In order to sustain the recent advance, look for earnings to come in toward the high end of Street estimates as the shares trade within earshot of the 52-week high.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: By using this report, you acknowledge that Selerity, Inc. is in no way liable for losses or gains arising out of commentary, analysis, and or data in this report. Your investment decisions and recommendations are made entirely at your discretion. Selerity does not own securities in companies that they write about, is not an investment adviser, and the content contained herein is not an endorsement to buy or sell any securities. No content published as part of this report constitutes a recommendation that any particular investment, security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Source: Earnings Preview For Disney 1Q 2012

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