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Disney (DIS) Q3 2019 Earnings Preview: Streaming, Studio, Parks & Media Networks

Benjamin Rains

Shares of Disney DIS have easily outpaced the market this year, up 31%, and currently rest just off their 52-week highs heading into the entertainment powerhouse’s Q3 fiscal 2019 earnings release. With that said, let’s see what investors should expect from Disney’s upcoming earnings and revenue results, along with its key business units, including Studio Entertainment, Streaming, and the ESPN-heavy Media Networks.

Recent News

Disney stock soared on April 11 after the company detailed some of its plans for its soon-to-be-launched streaming service, with DIS shares cooling off since then. What we know so far is still relatively limited and it is unclear how quickly consumers will adopt the new service. But what we do know clearly is that many on Wall Street think Disney+ will be able to compete against, or at least alongside the likes of Netflix NFLX, Amazon AMZN Prime Video, as well as Apple AAPL, AT&T T, and Comcast CMCSA.

Disney+ will launch in November at $6.99 a month and feature both new and old movies and TV shows from Disney, Pixar, Star Wars, Marvel, and National Geographic. Morgan Stanley analyst Benjamin Swinburne has projected that Disney+ will reach more than 130 million subscribers globally by 2024. For reference, Netflix closed Q2 with 151.56 million paid subscribers worldwide.  

As a whole, Disney is set to hold arguably the most diverse streaming portfolio in the industry by the fall: Disney+, ESPN+, and Hulu—which it now controls. And the price chart below shows just how excited Wall Street is for Disney’s streaming future. With that said, its Q3 earnings results are due out before we see what the finished Disney+ product looks like.

 

 

 

Q3 Outlook & Beyond

Last quarter, the entertainment conglomerate’s adjusted quarterly earnings topped our Zacks Consensus Estimate but fell 13% from the year-ago period as it spends more heavily on its streaming future. Meanwhile, revenues popped 3% and also surpassed our consensus mark.

Investors should remember that going forward the impact of Disney’s Twenty-First Century Fox deal and its Hulu ownership will be included. Therefore, Disney’s third-quarter revenue is projected to skyrocket 42.4% from the year-ago period to reach $21.68 billion. Overall, the firm’s full-year fiscal 2019 revenue is expected to climb 20.6% to $71.66 billion, with 2020 expected to climb 17% higher to $83 billion.

At the bottom end of the income statement, DIS’ earnings are projected to fall 5.9% to $1.76 per share. Meanwhile, its full-year fiscal 2019 EPS figure is projected to slip 7.2%.

Media Networks

Disney’s cable and broadcast division, which includes ESPN, is projected to jump 13.5% from $6.156 billion in Q3 2018 to $6.992 billion, based on our Key Company Metrics estimates. In the second quarter, the key unit’s sales came in flat.

Parks, Experiences & Consumer Product

Disney’s Parks, Experiences and Products revenue is projected to soar nearly 29% from $5.193 billion in the prior-year quarter to $6.683 billion, which would easily top last quarter’s 5% revenue expansion. Investors should also note that “Star Wars: Galaxy’s Edge” opened at Disneyland in May.

Studio Entertainment

The company’s Studio Entertainment leg is the most hit or miss of all of Disney’s divisions for somewhat obvious reasons. Studio Entertainment revenue in Q2 2019 fell 15%. The firm attributed the decline to the success of “Black Panther and the continued performance of Star Wars: The Last Jedi in the prior-year quarter compared to Captain Marvel and no comparable Star Wars title in the current quarter.”

With this in mind, Avengers: Endgame (released in late April) recently became the highest-grossing film of all time, surpassing Avatar—which Disney now owns. Meanwhile, Aladdin, which came out in late May, has pulled in over $1 billion. Overall, Disney has made more than $7.67 billion at the global box office this year. This set a new record, and we still have five months left in 2019.

Our estimates call for Disney’s studio unit to grab $4.755 billion in the quarter, which would mark a 65% surge from Q3 2018.

 

 

Direct-to-Consumer & International

Disney’s new Direct-to-Consumer & International segment is likely to be one Wall Street watches for years to come. This segment now includes Hulu, and is projected to jump from $1.001 billion to $3.374 billion.

Bottom Line

Clearly, Disney’s revenue is projected to jump in a big way based on the expected positive impact from its acquisition of key Fox assets and its controlling interest in Hulu. Nonetheless, it is beneficial to understand what to expect from the new and improved Disney’s upcoming financial results as it prepares to venture into the next stage of its storied history.

Disney is scheduled to release its Q3 fiscal 2019 earnings report after the market closes on Tuesday, August 6. Make sure to head back to Zacks for a complete breakdown of the firm’s actual quarterly metrics.

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