Walt Disney Company (DIS) will report fourth quarter fiscal 2018 earnings results after Thursday’s closing bell.
Although the media and entertainment conglomerate earlier this week took a major step towards securing its $71.3 billion deal to buy key 21st Century Fox (FOXA) assets, Disney will have to wait a few more quarters before any Fox-related windfall shows up on its bottom line. The main topic on Thursday will be the improvements Disney can show within its largest business segments, under which its bulk of revenue from its theme parks and movie studios are housed.
What’s more, we can’t discuss Disney without mentioning its premium sports network ESPN, which generates the lion's share of profits, but also the bulk of its operating expenses due to large sports broadcasting contracts with the NFL, NBA, Major League Baseball and several others with NCAA collegiate athletics. As such, the strength of ESPN, which accounts for some 44% of Disney’s adjusted earnings will be a key area of focus.
There’s also ESPN Plus — its streaming platform that was released earlier this year. There were concerns that ESPN Plus wasn’t gaining enough traction with consumers. On Thursday Disney will need to convince the Street that its growth ambitions to compete with Netflix (NFLX) as a full over-the-top streaming platform is worth the wait.
For the three months that ended September, analysts expects the Burbank, Calif.-based company to earn $1.33 per share on revenue of $13.72 billion. This compares to the year-ago quarter when earnings came to $1.07 per share on revenue of $12.78 billion. For the full year, earnings are projected to rise 21.3% year over year to $6.93 per share, while full year revenue of $58.85 billion would rise 6.7% year over year.
The projected top and bottom-line numbers would represent solid year-over-year growth for Disney. Digging deeper into the projected numbers within its various segments, the company is expected to post a 4% rise in Media Networks revenues, reaching $5.7 billion from last year’s mark of $5.46 billion. Analysts will focus closely on this segments, declined 3% in the year-ago quarter and houses Disney’s cable and broadcast assets, including ABC, Freeform, and the aforementioned ESPN, among others.
Disney’s Park and Resorts revenues, which is expected to rise almost 12% this quarter, will also be a key area of focus. Revenue are expected to reach $5.2 billion, up from $4.66 billion a year ago. Notably, the 12% increase, if achieved, would mark a growth acceleration of six percentage points from the 6% growth in the third quarter. Finally, I’ll be watching the results from Disney’s Studio Entertainment segment where revenues are expected to surge north of 27% to around $1.8 billion.
Disney’s timely movie release cycles and box office success has been a driving force for the company while it shores up deficits in the Media Networks segments. All told, there’s still a lot to lie with Disney’s direction and it’s fair to say that the worst of its ESPN cycle has come and gone. And with Disney shares still trading attractively at just 16 times next year’s profit estimates of $7.34, this can still be a magical investment, especially with the Fox deal inching closer to being finalized.