Disney ($DIS) is set to report Q1'16 earnings after the bell this afternoon, at 4:15pm ET. The company has an earnings webcast scheduled to follow at 5:00pm ET, which can be found on their investor relations page of their website. Disney does not typically provide forward earnings or revenue guidance with its release or during its conference call.

Key Metric: Current Capital IQ Consensus is for adj EPS of $1.44 on revenues +19% Y/Y to $14.75 bln.

  • FY16 Cap IQ Consensus is for adj EPS of $5.66 on revenues +7% to $56 bln.
  • Interesting fact: Disney has reported adjusted EPS above, or equal to (twice), Capital IQ Consensus every quarter since Q2 2011.
    • Last quarter, Disney beat on Q3 EPS of $1.20 ($1.14 Capital IQ Consensus) and reported in-line revenues of $13.51 bln.

Cut the Cord:

With ESPN being a huge revenue driver, the company was (possibly still is) tied to cable and media networks. Revs from media networks account(ed) for ~31% of the company's revs. 

  • One of the largest concerns investors have about Disney is that services like Netflix, HULU, and Amazon Prime are going to create headwinds for cable subscriptions going forward as consumers "cut the cord." The fear is that if cable subscriptions face headwinds, so too does Disney's Cable Networks revenue.
  • ESPN estimated their subscribers at ~92 mln as of October 3, 2015, which was down 3 mln from September 27, 2014 and down 7 mln from September 28, 2013.

Revs from the Cable Networks decreased their Y/Y growth from 12.2% in FY11 to 9.7% in 2015 (Growth fell to 5.8% in 2012, 6.1% in 2013, and 4.5% in 2014)

  • Disney announced that Star Wars: The Force Awakens was the largest U.S. box office of all time, surpassing Avatar's $760.5 mln record in just 20 days. It's since crossed $2B

Q4'15 Segment Results

  • Media Networks
    • Revenues of $5.8 bln; up 12% Y/Y and flat Q/Q.
    • Operating income of $1.8 bln; up 27% Y/Y and down 25% Q/Q.
    • Operating income increased Y/Y as a result of an increase at ESPN as well as to A&E Television and Disney Channels, to a lesser extent. ESPN reflected a benefit of a 53rd week, higher affiliate revenues and higher advertising revenues

This chart is setting up for a potential small pop (to sell) or an implosion

BIAS: Bearish

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