We expect entertainment giant The Walt Disney Company (DIS) to beat expectations when it reports fourth-quarter fiscal 2014 results scheduled for release on Nov 6, 2014.
Why a Likely Positive Surprise?
Our proven model shows that Disney may beat earnings because it has the right combination of 2 key components.
Zacks ESP: Disney currently has an Earnings ESP of +3.41%. This is because the Most Accurate estimate stands at 91 cents per share, while the Zacks Consensus Estimate is pegged at 88 cents.
Zacks Rank: Disney carries a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1, 2 and 3 have a 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 #2 and Earnings ESP of +3.41% makes us confident of a positive earnings beat on Nov 6.
What is Driving Better-than-Expected Earnings?
Disney is one of the world's major diversified entertainment companies. The company commands a formidable portfolio of globally recognized brands, which provide a strong competitive advantage and strengthens its well-established position in the market.
Disney continued its fabulous run in fiscal 2014 driven by its movie business which enjoyed unprecedented success. Roaring success of Frozen was followed by Captain America: The Winter Soldier, Maleficent and Guardians of the Galaxy, helping the company to post record earnings in all the three quarters. Guardians, which has already grossed over $600 million at the box office will make for superb year-over-year comparison with The Lone Ranger that bombed at the box office in the prior-year quarter.
Moreover, the merchandise associated with Frozen, especially the Elsa doll, modeled on the protagonist, are among the hottest selling toys this holiday season.
Moreover, launch of SEC network in the quarter and rising affiliate fees are likely to mitigate weakness in the Media Networks’ revenues. Also, Monday Night NFL broadcasted by ESPN continues to dominate top slots. Park and Resorts continue their good run and will greatly contribute to the quarters’ earnings.
Disney has topped the Zacks Consensus Estimate for the past several years, with a trailing four-quarter average positive surprise of 9.9%. In the last concluded quarter, the company outdid the Zacks consensus estimate by 9.4%.
Other Stocks to Consider
Disney is not the only firm looking up this earnings season. The following companies are also likely to beat earnings in the to-be-reported quarter:
CST Brands, Inc. (CST) has an Earnings ESP of +8.93% and a Zacks Rank #2.
Archer-Daniels-Midland Company (ADM) has an Earnings ESP of +5.33% and a Zacks Rank #3 (Hold).
Michael Kors Holdings Limited (KORS) has an Earnings ESP of +1.14% and a Zacks Rank #3.
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