Earnings Preview: Walt Disney (DIS) Q1 Earnings to Rise on Core Strength
By:NewsyStocks   Monday, February 06, 2022 9:44 AM

Media conglomerate Walt Disney Co. (DIS) will announce its first quarter results on February 7 after the market closes. The company is likely to report higher earnings on the strength of its Media Network, Cable Networks and Parks and Resorts results. However, the focus will be on the performance of studio entertainment division.

The company's results come on the heels of a deal struck with Comcast Corp. (CMCSA) for comprehensive distribution to cover Disney's various sports and entertainment content to Xfinity TV watchers.

Street analysts are estimating Burbank, California-based Walt Disney to deliver earnings of 71 cents a share on revenues of $11.20 billion. This represents earnings growth of 4.4 percent on revenue increase of 4.5 percent.

On January 10, Barclays Capital downgraded Walt Disney shares to Equal Weight from Overweight. While three analysts have Strong Buy rating, 13 analysts have Buy rating on the company's shares. Fourteen analysts recommended Hold rating, whereas no one recommends the stock for Sell.

The company earned 68 cents a share on revenues of $10.72 billion last year.

Fourth Quarter Results

Walt Disney reported net income of $1.09 billion, up 30.5 percent from $835 million and earnings grew 35 percent to 58 cents a share from 43 cents a share in the year earlier quarter. On an adjusted basis, earnings would have increased 31.1 percent to 59 cents a share from 45 cents a share in the year-ago quarter.

Top line witnessed 7 percent upside to $10.43 billion from $9.74 billion in the previous year quarter. Street analysts had a consensus earnings estimation of $54 cents a share on revenues of $9.74 billion.

In the last four quarters, Walt Disney's earnings failed to miss Street expectations in the second quarter only and topped consensus in other three quarters. The company earned 59 cents a share, 78 cents a share, 49 cents a share and 68 cents a share respectively in the four quarters of fiscal 2011.

On the top line, the company generated revenues of $10.43 billion, $10.68 billion, $9.08 billion and $10.72 billion respectively in the last four quarters.

Walt Disney's gross margin for the four quarters was 17.91 percent, 22.91 percent, 16.83 percent and 18.10 percent respectively. Similarly, operating margins were 18.25 percent, 23.49 percent, 17.27 percent and 19.26 percent respectively.

Our Take

For the trailing twelve-month period, Walt Disney's gross margin of 19.14 percent is weaker than News Corp.'s (NWS) 37.33 percent and Time Warner's (TWX) 43.89 percent and industry average of 41.45 percent. But operating margin of 19.14 percent is better than industry average of 6.28 percent and News Corp.'s 15.36 percent but weaker than Time Warner's 20.29 percent. The company seems to be sitting pretty well. However, gross margin and operating should be improved for better profitability. Walt Disney is also expanding its operations and will have its presence in China. The result will dictate which way the stock will move.