Disney Stock Needs More than an Earnings Beat to Get a Boost

Dow Jones
08/05

Walt Disney made efforts tocut costs in its fiscal third quarter—but it will take more than that to revive the entertainment company’s battered shares.

The House of Mouse is set to report Wednesday morning ahead of the opening bell. Analysts are expecting adjusted earnings of $1.86 a share on revenue of $25.4 billion, according to a FactSet poll. A year ago, Disney posted earnings of $1.61 a share on revenue of $23.7 billion.

Disney shares were down almost 14% since January through Monday’s close.

Benchmark analyst Mike Hickey said in a research note on Monday that this is a “high burden-of-proof quarter.” He rates the stock at Buy with a $115 price target, which implies upside of 17%.

“Disney must demonstrate that adjusted profit growth is increasingly being driven by revenue, engagement, scale and returns on recent investment, rather than headcount reductions, lower discretionary spending and share repurchases,” he added.

Cost reductions haven’t done much for the faltering stock, which has struggled for more than a decade due to cord-cutting, an expensive pivot into streaming, and leadership uncertainty.

Disney’s theme-parks segment emerged as its main moneymaker over that period, so investors are counting on Wednesday’s results to show strength in that business despite higher inflation and the war in Iran.

For the experiences segment, which covers both parks and cruises, Wall Street is looking for operating income of $2.78 billion on revenue of $9.76 billion.

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