Walt Disney Co (DIS) Stock: Only Magical Guidance Can Lift Disney Stock

Advertisement

Walt Disney Co (DIS) stock, like many stocks in the market nowadays, has not enjoyed a great showing this year. To date, shares are off more than 13%, which is three percentage points worse than the 10% loss the S&P 500 has thrown up.

Walt Disney Co (DIS) Stock: Only Magical Guidance Can Lift Disney StockThe immediate question on the mind of shareholders: Will fourth-quarter earnings provide any reprieve? Or will it only exacerbate the pain?

With results slated for after the bell on Tuesday, do-or-die time for DIS stock is rapidly approaching. Let’s take a look at what investors can expect from the looming report.

Disney Stock’s Q4 Expectations: By the Numbers

As most investors know, earnings are an expectations game. Namely, you’d better beat on the top and bottom lines if you want your stock price to go up meaningfully. And for big moves up, it never hurts to raise guidance as well.

So what does Wall Street expect the numbers to be for DIS stock?

In the fourth quarter, analysts are looking for revenue to rise 10.2% year-over-year to $14.76 billion. On that, analysts expect DIS to earn $1.45 per share, up 14% from a year ago, when Disney stock logged profits of $1.27 per share.

Remember, the fourth quarter is the first quarter that Star Wars: The Force Awakens revenue will be recorded, and given the fact that Star Wars posted the largest opening weekend of all time, you’d expect things to go somewhat well.

Thankfully, much of the Star Wars revenue will bleed over into the first quarter of this year as well, and when the next installment comes in 2017, DIS stock will have another blockbuster haul to look forward to.

While the Star Wars franchise is certainly a positive for Disney stock, the unfortunate part of it is that Disney is so large even Star Wars revenues barely make a dent. The movie just crossed the $2 billion mark for global box office receipts, a drop in the bucket compared to the $28 billion in revenue Disney stock is expected to report in Q4 and Q1.

Which brings me to my next point, and one that I think investors will be especially concerned about come Tuesday afternoon: guidance.

I believe that for DIS to tread water — or merely for it to not go down — Disney will need to provide in line or improved guidance for the fiscal first quarter. If Disney crushes Q4 revenue and earnings per share estimates in the fourth quarter, it will all be for naught if it’s accompanied by a Q1 revenue guide-down.

That’s because, while I still maintain that Disney is the world’s greatest diversified entertainment company by leaps and bounds, its struggles with cord-cutting are well-known, and a legitimate concern for investors.

Expect close attention to be paid to anything relating to ESPN, Disney’s cash cow, which has been losing subscribers in recent quarters. All it takes is a word or two from Iger to send this thing plunging — or soaring.

While I consider it a risky play going into earnings, long-term investors should know that Disney’s entertainment portfolio remains unrivaled.

As of this writing, John Divine held no position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2016/02/disney-stock-dis-earnings-preview/.

©2024 InvestorPlace Media, LLC