Will Disney Earnings Move the Dow?

With hundreds of companies having reported quarterly results, we're now in the heart of earnings season. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed, knee-jerk decision.

Let's turn to Disney (DIS -0.55%). The entertainment giant's 2012 gain of 35% crushed the overall returns of the Dow Jones Industrial Average (^DJI 0.67%), but it seems Disney is just getting started. Let's take an early look at what's been happening with Disney over the past quarter and what we're likely to see in its quarterly report on Tuesday.

Stats on Disney

Source: Yahoo Finance.

Will Disney use the Force to win?
Given the enthusiasm in the stock, it's surprising that analysts have been far less comfortable with Disney's prospects, having pushed earnings-per-share estimates down a dime over the past three months. But that hasn't held shareholder returns back, as the stock has pushed to new all-time highs and gained more than 11% since early November.

The big news for Disney's quarter was its content-distribution deal with Netflix (NFLX -0.08%), whereby Disney agreed to give the streaming giant a variety of its premium content, including new Disney films starting in late 2016. The deal reportedly will give Disney $300 million per year, and it should dovetail well with the similar streaming-license arrangement Disney already had with DreamWorks Animation. For Netflix, the move makes sense to keep competitors away, while the deal highlights the high value that content has right now.

But looking ahead, Disney has a lot of irons in the fire. Its recently concluded buyout of Lucasfilm will keep Disney's content machine revving, as the company now has a huge new library of existing and potential new blockbusters to monetize. In January it also introduced gaming platform Disney Infinity, which could give Disney an outlet for some of its Star Wars and Marvel content, challenging Activision Blizzard (NASDAQ: ATVI) and its Skylanders game and potentially drawing business away from that highly successful franchise.

Investors will want to look closely at how Disney's overall strategy moves forward, especially as its sports media franchise, ESPN, continues to ride its broadcast-rights partnerships with major sports organizations, while its theme park business expands into China. So far, though, everything seems to be going right for Disney.

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