It's been more than four months since Walt Disney (NYSE: DIS) shares have traded in the triple digits. The media giant's stock last topped $100 in late June, but it's closing in on the round milestone.
Momentum is on its side. The shares are moving higher for the third consecutive month. Disney also clocked in with intraday highs north of $99 -- just below $100 -- for the last three trading days of last week. All it needs is one last catalyst to push it higher, and that could come next week with a critical financial update.
Drawn to results
Disney tends to report near the tail end of earnings season. It will announce its fiscal fourth-quarter results on Wednesday afternoon. Expectations are modest on the top line, but ambitious at the other end of the income statement.
Analysts see revenue climbing nearly 6% to hit $22.4 billion for the seasonally potent summertime quarter that ended in September. It's not much, but it's actually an acceleration from the 4% year-over-year increase it posted three months earlier and a 2% gain it delivered through the first three fiscal quarters of 2024.
Accelerating revenue growth isn't coming from the segments that drove Disney higher earlier in the pandemic. The theme parks that quickly recovered to post record operating profits have stalled lately. A 4% increase in revenue for its domestic gated attractions in its fiscal third quarter was partly offset by a decline for its international parks. Operating income declined. Disney warned this summer that the moderation in demand it experienced would continue through the next few quarters. As for the fourth quarter it will discuss later this week, Disney is bracing investors for a decline in the mid-single digits for the segment's operating income.
Its linear media networks business that provided stability as folks were sheltering in place is now back to retreating. Revenue is slipping as cord-cutting is shrinking its viewer base and its ad impressions.
Thankfully, the rest of Disney's business is picking up the slack. Its streaming business has been growing over the years -- at the expense of Disney's own linear networks -- but now it's finally profitable. Disney mentioned in August that it expects its core Disney+ subscriber base to grow modestly in the fiscal fourth quarter. After a rough 2023 with mixed results for its theatrical releases, Disney rocked the multiplex this summer with Inside Out 2 and Deadpool & Wolverine.
Image source: Disney.
Earning its mouse ears
The bottom line could be the game-changer. Analysts see earnings per share climbing 34% to $1.10 a share, in line with Disney's guidance for 30% in adjusted earnings for the entire fiscal year. CEO Bob Iger returned to the helm two Novembers ago, championing cost cuts without sacrificing the necessary rejuvenations of the iconic brand. He succeeded on the bottom line. The clock is now ticking for him to return the stock back into Wall Street's favor.
The near-term outlook is promising, even though the stock declined for five consecutive months before its recent recovery. Disney will have more wiggle room now that its streaming business is profitable. Gains there will offset the gradual steps back for its legacy media networks. Turning to the silver screen, Disney already has the two most popular movies of 2024. By the time Moana 2 opens later this month and Mufasa: The Lion King in December, it could have all four of this year's biggest theatrical releases (or, at worst, four of the top five). The theme parks may take time to get growing again, but this summer Disney laid out the roadmap for improvement, with major new experiences arriving in the next few years.
Throw in a cruise ship fleet that will double in capacity in a couple of years, and you have a media stock ready for its close up. A strong report will get the shares back above $100. Now it just has to keep growing and execute a successful succession strategy for Iger to stay there.
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Rick Munarriz has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
