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Disney (DIS) 3rd Quarter Earnings: What to Expect

Media and entertainment company Disney (DIS) will report third quarter fiscal 2018 earnings results after Tuesday’s closing bell.

The strength of ESPN — its premium sports network, which accounts for some 44% of adjusted earnings — will be a key area of focus. Given the massive programming costs of ESPN, driven by broadcast rights it has with the NFL, NBA, Major League Baseball and several NCAA collegiate athletics, the secular shift of cable has taken a hefty toll on Disney’s bottom line. The company last quarter unveiled its ESPN-Plus streaming platform to little-to-no fanfare, suggesting investors weren’t impressed with its offering.

On Tuesday analysts will want to know the level of traction the new platform has gained with consumers. Anecdotally, it has been a sticky product for me personally as a sports addict. Beyond the new app, Disney will need to convince the Street that the company’s ambitions to compete with Netflix (NFLX) as a full over-the-top (OTT) streaming platform is not too far-fetched as early indication suggests.

For the three months that ended June, analysts expects the Burbank, Calif.-based company to earn $1.96 per share on revenue of $15.32 billion. This compares to the year-ago quarter when earnings came to $1.58 per share on revenue of $14.24 billion. For the full year, ending in October, earnings are projected to rise 24% year over year to $7.08 per share, while full year revenue of $59 billion would rise 7% year over year.

In the second quarter, the company beat on both the top and bottom lines, reporting Adjusted earnings of $1.84 per share, topping expectations of $1.70 per share, while Q2 revenue of $14.55 billion exceeded consensus of $14.11 billion. Thanks to the success of Marvel's "Black Panther,” the company enjoyed a 21% revenue surge in its studio entertainment business. The strength of Star Wars and the Marvel series continues to be a driving force in that segment.

Elsewhere, analysts will focus on the company’s acquisition of 21st Century Fox (FOX). An acquisition of Fox assets would broaden the company's content portfolio, making it more competitive to Netflix, while removing its stigma as a slow-growing media company. If or when the deal is completed, Disney would acquire not only Fox's television and film studios, but also regional sports networks, cable channels National Geographic and FX.

All told, Disney stock, which has risen 13% in three months, will be driven by more than just the top- and bottom-line results on Tuesday. And with the shares up just 4% over the past year, trailing the S%P 500 index, while trading at just 14 times full-year profit estimates of $7.08, the risk-versus-reward on Disney’s value tilts heavily to the buy side.

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


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

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Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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