Dow Jones Industrial Average constituent Walt Disney Co (NYSE:DIS) doesn’t report earnings until Tuesday evening. But for curious investors in front of the quarterly release, are there clues as to whether the reaction to DIS stock will prove bullish, bearish or simply a “goofy” non-event?
Let’s take a look at Disney’s recent quarterly announcements, analyst views, price chart and what, if anything, the options market estimates in front of the earnings report.
Disney Stock Earnings Picture
In front of Disney’s Tuesday evening third-quarter earnings release, Wall Street’s analyst community is forecasting profits of $1.61 per share of DIS. Views range from $1.54 to $1.72.
The current consensus estimate compares to last year’s same-quarter result of $1.45 for an estimated 11% gain. Full-year profit views are for Disney stock to grow by nearly 13% to $5.81 per share.
On the sales side, Disney’s revenues are expected to climb to $14.20 billion versus 2015’s Q3 result of $13.1 billion. Sequentially, sales are expected to gain 9% from Q2’s result of $13 billion.
Full-year sales forecasts for DIS are pegged at $56.3 billion for year-over-year growth of 7.30%. Looking into 2017, analysts expect the entertainment giant to post a more modest increase of 4.40% on revenues of $58.8 billion.
Buy, Sell or Hold Disney Stock
Of 34 analysts polled by CNN Money, 14 firms have “buy” recommendations on Disney stock. Two analysts have an “outperform” rating.
Maybe surprisingly, a majority of outfits (17 in total) maintain a hold on DIS. Disney stock also has one firm slapping shares with a “sell” rating.
The median price target on DIS is 20% above current levels at $115 with a low forecast of $88 and high estimate of $134 per share.
Disney Stock Short-Term Trading Record
Disney stock has established a decent record of beating Street profit views. Over the past 12 quarters the company has topped estimates 83% of the time, managing 10 beats, one in-line result and one profit miss. Investor reaction in shares of DIS has proven less robust. Disney stock has produced four price declines compared to rallying on two occasions in the earnings report’s immediate aftermath.
Working backward, DIS has registered moves of -4.04%, -3.76%, 2.36%, -9.16%, -0.19% and 7.63% over the past several quarters.
The overall investor reaction in Disney stock translates into a modest decline of -1.19% with fairly large price variability of 5.82% based on a one standard deviation reading.
The combination makes for a difficult task of gleaning consistency from recent earnings-driven price moves in DIS.
What’s more, DIS’ seven day stock performance is fairly similar to the one day result. Despite the longer holding period, shares have moved an average of -1.32% with a 6.89% standard deviation.
Disney Stock Weekly Chart
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Over the past year, DIS had been in the process of putting together a decent-looking corrective base. From last summer’s flash crash low into February’s undercut hammer pivot, Disney stock began moving higher off a weekly double bottom pattern.
The past couple months, however, have been less kind to Disney stock, as the bullish corrective formation has yielded to a third (bearish) lower high.
Highlighted in yellow, the lower high reversal candle was established after DIS shares failed at resistance comprised of its 50-week simple moving average and a long-standing uptrend.
The bearish technical event has resulted in the bullish double bottom losing its efficacy — and in our opinion, points to a pending breakdown and new year-to-date lows in Disney stock.
Disney Stock Options Pricing
Options trading activity in Disney this past Friday was mostly of the pedestrian variety with little in the way of interesting contract volume.
Nevertheless, with the trading that has occurred, we can point to Disney stock’s options traders collectively assigning a 68% chance shares will remain within a range from about $92 to $100 through Friday.
The math behind the DIS price range calculation is based on the at-the-money weeklys Aug. 12 $96 straddle market, which trades on implied volatility of 30% and seven calendar days from last Friday’s close into expiration.
The weeklys contract is the purest play on Disney stock’s earnings event and tells us what short-term traders are pricing for Disney stock in the immediate aftermath of its quarterly announcement.
The expected dollar move up or down works out to about 4.15% by Friday’s close in shares of DIS. A result of this magnitude is a good deal larger than the average reading of -1.19% of recent events. That said, the current estimate does fit within the boundaries of normal pricing based on Disney stock’s larger standard deviation reading, which measures dispersion from the mean.
Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.
