Will Disney (DIS) Miss Q3 Earnings on Higher Sports Costs? - Analyst Blog


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Media giant, The Walt Disney Company ( DIS ), is set to report its third-quarter fiscal 2014 results on Aug 5, 2014. Last quarter, it posted a positive earnings surprise of 14.4%.  Let us see how things are developing for this announcement.

Growth Factors this Quarter

Rise in programming costs due to higher sports rights deals (World Cup, NLF, Major League Basketball and college football rights and SEC Network Launch) are the near-term headwinds that are likely to prove a drag on Disney's quarterly performance. Moreover, the unfavorable impact from currency fluctuations is an added concern. However, the impact of Easter that fell in the third quarter should boost the performance of Parks and Resorts segment. Also, the roaring success of Frozen should continue to enhance profitability at both Studio Entertainment and Consumer Products segments.

In the latest development, Disney has signed a multi-year distribution agreement with The National Cable Television Cooperative (NCTC) to relay best quality sports, news and entertainment content to the customers of NCTC members across Television, smartphones, computers, gaming consoles, tablets and other connected devices.

Earnings Whispers

Our proven model does not conclusively project Disney as likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and Zacks Rank #1 #2 or #3 for this to happen. This is not the case here as you will see below.

Zacks ESP:  ESP for Disney is -0.86%. This is because the Most Accurate estimate stands at $1.16 per share whereas the Zacks Consensus Estimate stands at $1.17.

Zacks Rank: Disney's Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings surprise. We caution against stocks with a Zacks Rank #4 and #5 (Sell-rated stocks) going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows these to have the right combination of elements to post an earnings beat:  

The Andersons, Inc. ( ANDE ) with an Earnings ESP of +6.09% holds a Zacks Rank #2 (Buy).

Archer Daniels Midland Company ( ADM ) has an Earnings ESP of +2.67% and a Zacks Rank #3.

Time Warner Inc. ( TWX ) has an Earnings ESP of +1.19% and a Zacks Rank #3.

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ARCHER DANIELS (ADM): Free Stock Analysis Report

ANDERSONS INC (ANDE): Free Stock Analysis Report

TIME WARNER INC (TWX): Free Stock Analysis Report

DISNEY WALT (DIS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
More Headlines for: ADM , ANDE , TWX , DIS

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