Over the past several years, Disney (DIS -1.95%) shareholders have been on an unrelenting roller coaster ride, befitting one of its many theme parks. Fears involving the changing media landscape and pressure on the company's flagship ESPN sports network and its cable channels have given investors pause, and its stock is back at the same level it was trading at more than three years ago. The tide may be turning, however, as Disney is currently up more than 7% in 2018, topping the S&P 500's 2% increase.
Investors will be looking for indications that Disney's return to its winning ways will continue when the company reports the results of its fiscal fourth-quarter and full-year 2018 earnings after the market close on Thursday, Nov. 8. Let's look at Disney's performance and recent news to see if they provide any insight into what shareholders can expect next week.
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A look back
For the third quarter (which ended June 30), Disney reported revenue of $15.2 billion, up 7% year over year, while adjusted earnings per share of $1.87 jumped 18%. Both numbers were lower than analysts' consensus estimates.
Revenue from media networks, including ESPN, the Disney Channel, and the ABC television network increased 5% year over year to $6.2 billion, driven by higher affiliate fees. Parks and resorts revenue of $5.2 billion increased 6% year over year on higher guest spending and increased attendance. The studio segment saw the biggest increases, up 20% to $2.9 billion due to strong runs for Avengers: Infinity War and Incredibles 2. Consumer products lagged, down 8% to $1 billion due to the timing of theatrical releases.
A lot has happened since the last report
There were significant business developments that have occurred since Disney's last earnings report. One of the biggest was Disney's decision to abandon its takeover of European cable operator Sky. Disney won a bidding war against Comcast over which company would merge with Twenty-First Century Fox (FOX) (FOXA), and the tussle continued over Sky. In a rare auction held by U.K. regulators, Comcast prevailed in its pursuit of Sky, resulting in the decision by Fox (at Disney's bidding) to sell its existing stake in Sky for $15 billion. Investors cheered the outcome, which significantly reduced the debt Disney would need to take on to acquire Fox.
On another front, Disney's rirect-to-consumer and international (DTCI) segment announced in late September that its nascent streaming service, ESPN+, had signed up more than one million paid subscribers since the app was introduced in April. The success of this initial effort likely signals good things to come, as the company plans to release a Disney-branded service in late-2019. There are also plans to leverage the massive content library that comes from Disney's acquisition of Fox to boost the appeal of Hulu. Currently, Disney owns just 30% of the top-three streaming service, but its stake will jump to 60% when the Fox merger closes.
What the quarter may hold
Disney doesn't provide quarterly guidance. To provide some context -- though we don't place much emphasis on Wall Street's short-term mindset -- analysts' consensus estimates are calling for revenue of $13.72 billion, up 7.4% year over year, and earnings per share of $1.33, up 24% compared to the prior-year quarter.
Results at the media networks segment should be consistent with last quarter, though subscriber declines have been slowing for four successive quarters, so look for that to continue. With a lighter film slate, led by Ant-Man and the Wasp and Christoper Robbin, Disney will have to rely on attendance at its parks and resorts to take up the slack. Consumer products might have seen an uptick in sales related to the Avengers and Incredibles movies.
Some of the more compelling revelations, however, may be regarding its progress toward closing the acquisition of Fox and the demand for its ESPN+ streaming service. Stay tuned.
