Disney Earnings: What to Watch

Walt Disney Co. (DIS 0.68%) is slated to report its fiscal third-quarter 2019 results after the market closes on Tuesday, Aug. 6.

The entertainment behemoth is going into the report on a strong note: Its movie studio is firing on all cylinders, it closed on the Twenty-First Century Fox acquisition in late March, it began rolling out a major new Star Wars attraction at its domestic parks, and it's preparing to launch its broad direct-to-consumer streaming service, Disney+, in November.

Driven by investor excitement about the company's evolving business along with first- and second-quarter results that were likely better than most investors were expecting, shares have returned 29.2% in 2019 through Aug. 2. The S&P 500 has returned 18.3% over this period. 

Here's what to watch and expect in Tuesday's report.

Image source: Disney.

The headline numbers

Here are the year-ago period's results to use as benchmarks:

Data source: Disney.

Disney doesn't provide guidance. For some context (though long-term investors shouldn't give too much importance to Wall Street's short-term estimates), analysts expect the House of Mouse to earn $1.75 per share on revenue of $21.48 billion, representing a decline of 6.4% and growth of 41%, respectively, year over year.

The huge projected boost in revenue stems from the Fox acquisition, which closed at the tail end of Disney's fiscal second quarter. On the flip side of the coin, integration costs will surely cut into the company's profits. Investors can expect management to discuss this topic on the earnings call.

For context, in the first six months of the fiscal year, Disney's revenue edged up 1% and its adjusted earnings per share (EPS) declined 8% year over year. The company's business performance was better than these results suggest, as it faced very tough comparables in its movie business in both the first and second quarters.

Beyond the headline numbers, here's what to focus on.

Will parks continue to lead its segment's results higher?

There's reason to believe that the parks, experiences, and consumer products segment will continue to perform solidly, led by the parks and resorts business, specifically domestic parks. Quarter after quarter, Disney's domestic parks have come through. Last quarter, visitors to domestic parks increased their average spending 4% year over year, while attendance was up 1%.

Domestic parks will benefit from a calendar-related tailwind. The quarter to be reported included both weeks of the Easter holiday, while the year-ago period included just one week.

Investors should also learn how the new Star Wars: Galaxy's Edge attraction at Disneyland is affecting the park's performance. That huge attraction opened at the California park on May 31 and is scheduled to open at Florida's Disney World on Aug. 29.

For context, in the first half of fiscal 2019, the parks, experiences, and consumer products segment's revenue grew 5% year over year and its operating income jumped 12%. 

Studio entertainment's Marvel-ous quarter

During the fiscal third quarter, Disney released six movies: Penguins, Avengers: Endgame, Aladdin, and Toy Story 4 from its studios, and Tolkien and Dark Phoenix from the Fox studios. Marvel's latest Avengers film, which has shattered numerous major box office records, has raked in nearly $2.8 billion in theatrical receipts, as of Sunday morning. Aladdin and Pixar's Toy Story 4 have also performed very well, with ticket sales tallying just over $1 billion and about $959 million, respectively. Moreover, Captain Marvel, which was released just a few weeks before the start of the fiscal third quarter, should also contribute to the quarter's results.

This powerful lineup should compare favorably to the year-ago period's robust roster, comprised of Avengers: Infinity War and Pixar's The Incredibles 2. Of course, home entertainment's performance will also be a notable factor in the segment's overall results.

Direct-to-consumer: Disney+ update 

On the earnings call, CEO Bob Iger is likely to provide an update on the planned launch of Disney+, which is scheduled for Nov. 12. The company has a lot riding on this broad, direct-to-consumer (DTC) streaming service.