Walt Disney Fiscal First Quarter Earnings Report (Tuesday, February 7, after the close)

Why it's important

Going into earnings, Disney's concerns about subscriber numbers for ESPN and rising programming costs continue to surround the company's Media Networks segment, which accounted for 42.6% of fiscal 2016 revenue and 49.3% of segment operating income.

Success of films like The Force AwakensZootopiaJungle Book, and Captain America: Civil War, Disney is facing concerns about tough comparisons in coming quarters. Investors will be looking for assurances the company expects to continue to deliver on high expectations for its Studio Entertainment business. 

Investors will look to the advertising strength of Disney's consumers' discretionary spending behavior. Investors will be interested to hear the company's outlook for advertising revenue in fiscal 2017. 

Focus will be on the following:

  • The opening of Shanghai Disney Resort will offer key insight on consumer discretionary spending activity in China and the surrounding region
  • Recent press reports have suggested CEO Bob Iger might continue in his role longer than expected.  It would be regarded as a positive for the stock if that speculation was confirmed.
  • Shares of DIS have outperformed in early 2017, up 4.5% year-to-date.

What Disney said after its fourth quarter earnings report in November

  • Sees modest EPS growth for fiscal 2017
    • Cable programming costs to be up 8%, mostly because of its NBA deal (cable programming expenses will be more normalized in 2018 with the first year of the NBA contract behind them)
  • More bullish on ESPN subscriber base; subscriber declines to small cable packages will decline
  • Shanghai Park will be break even in 2017
  • Studio business will have tough comps in 2017, but still very excited for its prospects
  • The Board is still looking for a successor to Bob Iger

DIS Steady Trend

Stocks Affected

  • DIS

Index ETFs

  • SPDR Dow Jones Industrial Average ETF (DIA)
  • SPDR S&P 500 ETF (SPY)
  • Consumer Discretionary Select Sector SPDR (XLY)
    • DIS is fourth-largest holding at 6.70% of assets

Other theme park operators

  • Six Flags Entertainment (SIX)
  • Cedar Fair (FUN)
  • SeaWorld Entertainment (SEAS)

Other network/media/cable companies

  • Comcast (CMCSA)
  • Charter Communications (CHTR)
  • Discovery Communications (DISCA)
  • CBS Corp (CBS)
  • Viacom (VIAB)
  • Twenty-First Century Fox (FOXA)
  • Time Warner (TWX) [being acquired by AT&T (T)]