We expect entertainment giant The Walt Disney Company (DIS) to beat estimates when it reports first-quarter fiscal 2015 results on Feb 3, 2015.
Why a Likely Positive Surprise?
Our proven model shows that Disney may beat earnings because it has the right combination of two key components.
Zacks ESP: Disney currently has an Earnings ESP of +2.78%. This is because the Most Accurate estimate stands at $1.11 per share, while the Zacks Consensus Estimate is pegged at $1.08.
Zacks Rank: Disney carries a Zacks Rank #3 (Hold). 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 #3 and Earnings ESP of +2.78% 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. The company commands a formidable portfolio of globally recognized brands that provides a 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 every quarter.
Even after a year from its release, Frozen continues to mint money. The merchandise associated with Frozen, especially the Elsa doll modeled on the protagonist, was among the hottest selling toys this holiday season.
Moreover, ESPN’s dominating position in the sports arena and rising affiliate fees are likely to mitigate weakness in the Media Networks’ revenues. Park and Resorts continue their good run and will greatly contribute to the quarters’ earnings owing to the holiday season.
Disney has topped the Zacks Consensus Estimate for the past several years, with a trailing four-quarter average positive surprise of 9.8%. In the last concluded quarter, the company outdid the Zacks consensus estimate by 1.1%.
Other Stocks to Consider
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Thomson Reuters Corp. (TRI) has an Earnings ESP of +2.08% and a Zacks Rank #3.
Chipotle Mexican Grill, Inc. (CMG) has an Earnings ESP of +3.18% and a Zacks Rank #2 (Buy).
Archer-Daniels-Midland Co. (ADM) has an Earnings ESP of +3.30% and a Zacks Rank #3.
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