Walt Disney Co. (NYSE: DIS) is set to report its fiscal third quarter earnings after the market close on Tuesday. Concerns over cord-cutting and subscriber losses at ESPN have weighed on the stock in 2017, but there are several reasons for longer-term optimism at Disney.
The good news for Disney investors is that market expectations for the third quarter seem to be relatively low, leaving room for potential upside surprise. Wall Street analysts are predicting Disney will report earnings of $1.53 per share on revenue of $14.6 billion. Those numbers would represent a 5.5 percent year-over-year EPS decline and only 2.3 percent revenue growth.
Aside from the headline numbers, Disney investors will be watching for details about key business segments. ESPN has been losing roughly 300,000 subscribers per month in the past two years as part of a long-term decline in its traditional cable TV business. Investors will be looking for updates on Disney’s own sports streaming service, as well as any changes to the pace of ESPN subscriber losses.
While the bar is exceptionally low for ESPN, Disney’s film business is facing difficult year-over-year sales comparisons thanks to 2016 summer movie hits “The Jungle Book,” “Captain America: Civil War” and “Finding Dory.” Studio revenue jumped 40 percent in the third quarter a year ago due to the jam-packed summer lineup.
Disney has had its share of hits this summer as well, including “Guardians of the Galaxy Vol. 2″ and “Pirates of the Caribbean: Dead Men Tell No Tales,” but box office data show Disney’s top films are trending below last summer’s levels.
It’s unlikely that Disney will report impressive top or bottom-line growth numbers in the third quarter, but CNBC analyst Jim Cramer recently said long-term Disney investors shouldn’t get too hung up on one quarter.
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