We expect entertainment giant The Walt Disney Company DIS to beat estimates when it reports third-quarter fiscal 2015 results on Aug 4, 2015.
Why a Likely Positive Surprise?
Our proven model shows that Disney may beat earnings this season because it has the right combination of two key components.
Zacks ESP: Disney currently has an Earnings ESP of +2.16%. This is because, while the Most Accurate estimate stands at $1.42 per share, the Zacks Consensus Estimate is pegged at $1.39.
Zacks Rank: Disney carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Disney’s Zacks Rank #3 and Earnings ESP of +2.16% makes us confident of a positive earnings beat.
What's Driving Better-than-Expected Earnings?
Disney is one of the world's major diversified entertainment companies. With a formidable portfolio of globally recognized brands, the company bears a competitive advantage that strengthens its already well-established position in the market.
Analysts observe that Disney’s movie business had a fabulous quarter with Avengers: Age of Ultron amassing $1.4 billion worldwide, making it the sixth highest grossing movie of all times. Though Inside Out released toward the end of the quarter, it saw a strong opening as well as second weekend, which should add to the top line. The superb performances by Avengers: Age of Ultron and Inside Out are likely to offset the box office debacle of the George Clooney starrer Tomorrowland.
Park and Resorts continued with their good run, which will likely support the quarterly earnings to a great extent, led by the 60th anniversary celebrations at Disneyland.
Media Networks witnessed a rise in advertising revenues driven by NBA finals, while retransmission fees are likely to continue their upward trend. These are, on the other hand, expected to offset negative impact of currency headwinds as well as ESPN’s diminishing subscriber base.
Disney has topped the Zacks Consensus Estimate for the past several years, with a trailing four-quarter average positive surprise of 9.7%. Last quarter, the company outpaced the Zacks consensus estimate by 10.8%.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Guess' Inc. GES has an Earnings ESP of +6.67% and a Zacks Rank #1.
Dean Foods Company DF has an Earnings ESP of +3.85% and a Zacks Rank #2.
ULTA Salon, Cosmetics & Fragrance, Inc. ULTA has an Earnings ESP of +0.90% and a Zacks Rank #2.
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