Walt Disney Co Earnings Preview: How Much Of A Problem Is ESPN?

Walt Disney is set to release its next earnings report tonight after closing bell, and analysts are expecting adjusted earnings of $1.39 per share on $13.2 billion in revenue for what will be the company’s second fiscal quarter. In the year-ago quarter, Disney posted $1.23 per share in adjusted earnings on $12.5 billion in revenue.

The company has either met or beat earnings estimates in every quarter since the second quarter of 2011 and beat revenue estimates in eight of the last ten quarters, according to MarketWatch.

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Watching ESPN, media networks

Analysts expect Walt Disney’s media networks segment to have recorded $5.9 billion in revenue during the second fiscal quarter, but sports TV network ESPN is expected to weigh on the entertainment giant’s results. Nomura analysts are expecting a significant decline in revenue because of event timing this year. Also Fortune notes that ESPN has been losing viewers as more and more consumers cut the cord and opt for less expensive streaming services instead of traditional pay-TV.

Further, Piper Jaffray analysts noted recently that ABC, one of Walt Disney’s biggest media networks, saw its ratings tumble 15% in the first quarter, which will likely have a significant impact on the segment’s revenue.

Walt Disney films, theme parks to provide solid base

MarketWatch also notes that Star Wars: The Force Awakens helped offset some of the negative impact from ESPN, and Disney should have continued to benefit from its massive success in the most recently completed quarter. Animated film Zootopia was also a huge success, although the company expects to take a $75 million write-off from the film misstep The Finest Hours. Nomura analyst Anthony DiClemente expects The Jungle Book and Captain America: Civil War to boost Disney’s results going forward as he said pre-release tracking suggests a $175 million to $200 million opening weekend just in the U.S. alone.

Another strong area for Disney is expected to be parks and resorts, which analysts also expect to perform well. Nomura believes strong travel trends will benefit Disney World in Orlando. Walt Disney parks should receive another boost next month with the opening of Disneyland Shanghai. Already tourists have been visiting the theme park’s shops, restaurants and resorts en masse in anticipation of that opening.

Shares of Walt Disney climbed by as much as 0.99% to $106.38 during regular trading hours today.