Entertainment giant The Walt Disney Company (NYSE:DIS) registered growth last year. From revenues to net income to earnings per share, all improved on a year-over-year basis in fiscal 2018.
Disney’s stock has also returned 5.3% in the past year. That’s actually a commendable performance, given the broader S&P 500’s meager gain of 1.3% over this period.
But, can Disney repeat such an encouraging performance when it reports first-quarter fiscal 2019 results after market close on Feb 5? Let’s take a look —
Fox Acquisition and Streaming Plans
Disney has spent a lot in acquiring Twenty-First Century Fox, Inc. (NASDAQ:FOXA) . Initially, the value of the bid was $52.4 billion. Later, bidding war catapulted the value of the transaction to nearly $70 billion. But, Disney hasn’t yet given a timeline for the deal closure. So, a lot can be expected from Disney CEO Bob Iger to share information about the company’s plans to integrate Fox’s properties during the upcoming first-quarter earnings call.
Investors are, thus, eagerly looking into transition details and any positive insight should certainly help the stock move north. Meanwhile, any negative development may not thrill investors, leading to fall in share price. And that doesn’t bode well for the company, given that the stock has underperformed the broader Media Conglomerates industry (+2.0% vs +3.8%).
Iger is widely expected to provide details about the company’s direct-to-consumer streaming services, including ESPN which was rolled out last April. An encouraging report on the streaming front should certainly boost its share price. Needless to say, the company has been enthusiastically entering the streaming business after its cable business struggled to grow profits in recent years. And how can we forget that the company’s operating income fell 4% in fiscal 2018 mostly due to a 4% drop in cable’s operating income.
Parks & Resorts to Expand, Movie Business to Decline
The park segment, Disney’s second largest business area in terms of revenues and operating income, has always stood in good stead for the company both during challenging and good times. Investors, thus, can probably expect the same to happen this time around.
Lest we forget, Disney parks’ revenue and operating income climbed 13% and 21% year over year, respectively, from the year-ago quarter. Also, the segment’s revenues and operating income rose 10% and 18%, respectively, in fiscal 2018.
But, the same cannot be said about Disney’s theatrical business that includes its home entertainment business. Box-office revenues from its movies released in the first quarter of fiscal 2019 are expected to be much less than those released in the year-ago period.
Bottom Line
Investors are focused on Disney’s Fox acquisition and its streaming plans. At the same time, they expect the park business to do well and the movie business to decline. Analysts, thus, see earnings per share falling to $1.55 in the first quarter earnings from $1.89 a year earlier.
The Zacks Rank #3 (Hold) company’s revenues are also expected to slip 1% to $15.18 billion for the holiday-containing quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
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