Disney is expected to release its Q2 FY’24 results on May 7, with revenues projected to reach $22.2 billion, slightly exceeding consensus estimates, indicating a 2% increase from the previous year. Earnings are expected to reach $1.11 per share, in line with consensus. The company’s theme park business is expected to experience modest growth, with international parks showing higher attendance and spending at Shanghai and Hong Kong properties, while the domestic side might face challenges due to increased costs and tough year-over-year comparisons. Linear TV business saw headwinds in Q1, but there may be improvements in Q2. The streaming business performance will also be closely monitored due to mounting competition and recent challenges.
Over the past three years, Disney stock has underperformed the broader market, with a 35% decline from early January 2021 to around $115 now, compared to a 35% increase for the S&P 500 during the same period. Returns for DIS stock have been negative in each of the last three years, while the S&P 500 has seen positive returns. Beating the S&P 500 has been challenging for individual stocks, even for heavyweights in the Communication Services sector and mega-cap stars. However, the Trefis High Quality Portfolio has outperformed the benchmark index each year over the same period. The uncertain macroeconomic environment with high oil prices and elevated interest rates raises questions about whether Disney will continue to underperform or see a recovery.
Despite concerns in the streaming and media operations, Disney remains positive for a couple of reasons. The company is restructuring its business to unlock more value and increase profitability by cutting costs. Disney expects to exceed its goal of reducing expenses by $7.5 billion by the end of the fiscal year, with projected earnings per share growth of at least 20%. Disney stock is down over 40% from its 2021 highs, and analysts value it at around $124 per share, which is 10% above the current market price. Disney’s focus on cost-cutting and profitability improvement could drive stock performance in the future, despite current challenges in the streaming and media operations.
Investors are keen on Disney’s upcoming earnings report to assess the company’s performance in various segments like theme parks, linear TV, and streaming business. The international parks are expected to drive revenue growth, while challenges may persist on the domestic side. The streaming business faces competition and recent setbacks, but cost-cutting efforts and restructuring initiatives could propel earnings growth. Disney stock has underperformed the market in recent years, but the company’s focus on cost reduction and profitability improvement presents a positive outlook. Investors will closely watch Disney’s Q2 results and future guidance to gauge the company’s potential for recovery and growth in the coming quarters.
