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Disney Earnings: What to Watch

Walt Disney Co. (NYSE: DIS) is slated to report its fiscal first-quarter 2019 results after the market close on Tuesday, Feb. 5.

After a challenging fiscal 2017, the entertainment giant returned to the growth track last year. In fiscal 2018, revenue grew 8%, segment operating income rose 6%, net income soared 40%, earnings per share surged 47%, and EPS adjusted for one-time factors jumped 24% year over year.

Disney stock has returned 1.1% over the one-year period through Jan. 22. That's actually a better performance than it might seem, given the S&P 500 (including dividends) has declined 4.5% over this period.

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

Image source: Getty Images.

The headline numbers

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

Metric

Fiscal Q1 2018 Result

Revenue

$15.35 billion

Adjusted earnings per share

$1.89

Data source: Disney.

Disney doesn't provide guidance. For some context (though long-term investors shouldn't place too much importance on Wall Street's short-term estimates), analysts expect the House of Mouse will earn $1.56 per share on revenue of $15.18 billion, representing declines of 17.5% and 1.1% year over year, respectively.

Keep in mind that Disney's quarterly results will be "lumpy," largely due to the timing of movie releases and where major holidays and big sporting events fall on its fiscal calendar.

Here's what to expect for Disney's three largest segments.

Media networks: Focus on Fox acquisition and streaming services

As of this writing, Disney's pending massive acquisition of Twenty-First Century Fox's entertainment assets has not yet closed. However, it's being widely reported that it could be a done deal any day now. So there seems a good possibility that on the upcoming first-quarter earnings call that Disney CEO Bob Iger could be sharing notably more information than before about the company's plans to integrate Fox's properties into the fold.

Iger is also likely to provide some details on the earnings call about the company's direct-to-consumer streaming services: its sports-focused ESPN+, which rolled out last April, and its planned broader streaming offering, slated to launch sometime in late 2019.

Investors shouldn't sweat media networks' results. By now, most investors likely know the company's cable business has been struggling in recent years to grow profits due to consumers increasingly preferring to devour their media entertainment via streaming options rather than cable TV. This secular trend is why Disney is vigorously entering the streaming market. In fiscal 2018, media networks' revenue grew 4%, but operating income fell 4%, driven by a 4% drop in cable's operating income.

Parks and resorts: Look for old reliable to continue to grow

The parks segment -- its second-largest business by revenue and operating income behind media networks -- has come through for the company during both challenging and good times. Investors can probably expect more of the same.

That said, Disney has a high year-over-year profit comparable to overcome. In the year-ago quarter, parks' revenue and operating income jumped 13% and 21% year over year, respectively. For a broader perspective, in fiscal 2018, the segment's revenue increased 10% and operating income rose 18%. Growth was driven by the company's domestic business.

Studio entertainment: Expect a decline in profits

Studio entertainment consist of more than just Disney's theatrical business, as the segment also includes its home entertainment business, among other things. That said, worldwide box-office results for the entertainment titan's movies released in the first quarter of fiscal 2019 versus those released in the year-ago period strongly point to a year-over-year decrease in revenue and profits.

Here's how much money global moviegoers have shelled out to date for tickets to Disney's films released in the quarter to be reported:

Rank of Movies Released in 2018

Disney Movie Released in Fiscal Q1 2019

Worldwide Box-Office Gross Sales

18

Ralph Breaks the Internet

$457.9 million

30

Mary Poppins Returns

$307.8 million

43

The Nutcracker and the Four Realms

$173.6 million

--

Total

$939.3 million

Data source: Box Office Mojo; data as of Jan. 22, 2019, 5:50 p.m. PST.

Now here's the data for the year-ago quarter's release line-up:

Rank of Movies Released in 2017

Disney Movie Released in Fiscal Q1 2018

Worldwide Box-Office Gross Sales

1 Star Wars: The Last Jedi $1,332.5 million
9 Thor: Ragnarok $854.0 million
11 Coco $807.1 million

--

Total

$2,993.6 million

Data source: Box Office Mojo; data as of Jan. 22, 2019, 5:50 p.m. PST.

Granted, these films didn't generate their current total ticket sales entirely in the same quarter in which they were released. But this comparison should still provide solid insight into how Disney's studio business' results will stack up relative to the year-ago period.

For some context, in fiscal 2018, the segment's revenue grew 19% and operating income soared 27% year over year.

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Beth McKenna has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool has a disclosure policy.

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