Disney Stock Quiet Ahead Of Earnings; Magic Kingdom Expands Charges Against Sunshine State
Walt Disney (DIS) announces second-quarter results late Wednesday. Meanwhile, the Dow Jones entertainment giant expanded its lawsuit against Florida Gov. Ron DeSantis in its battle for control over Walt Disney World. Morgan Stanley raised its price target on Disney stock ahead of the report.
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MS Raises Price Target For DIS Stock
Morgan Stanley analyst Benjamin Swinburne on Monday raised earnings estimates for Disney after the company incorporated cost-cutting measures. In early February, Disney announced a major reorganization that would include slashing 7,000 jobs and cut $5.5 billion in costs, including $3 billion in content savings.
Morgan Stanley sees strong adjusted EPS growth ahead and contends the parks portion of the business "generates compelling growth through cycles," and expects it to represent the majority of earnings before interest and taxes (EBIT) for Disney's segment for "years to come." The report also noted Disney's media business is "under-earning and undervalued," as the streaming-first strategy diluted the segment's earnings power.
But "there are opportunities to rebuild," Swinburne wrote. He notched up his price target on Disney stock to 120 from 115, about 18% above where shares traded on Tuesday, and maintained an overweight rating.
Face Off In Florida
Disney expanded its lawsuit against Florida Gov. DeSantis Monday to include new Florida bills that nullify previously approved development deals and put Walt Disney World's monorail system under state oversight.
Florida's Senate passed a bill last week allowing the DeSantis-appointed tourism board to cancel development agreements approved by Disney's preceding Reedy Creek Improvement District.
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"Gov. DeSantis and his allies have no apparent intent to moderate their retaliatory campaign any time soon," Disney wrote in the additions to the civil complaint.
Disney first filed the lawsuit against DeSantis on April 26, claiming the governor is orchestrating a "targeted campaign of government retaliation" after the company spoke out against Florida's bill banning gender identity and sexual orientation discussions in elementary school classrooms last year.
The company cited DeSantis statements about plans to add hotel taxes, toll roads, more amusement parks in the district or even a state prison next to Walt Disney World.
Disney Earnings
Expectations: Analysts polled by FactSet expect earnings to fall for the third quarter in a row, tumbling 13% to 93 cents per share. FactSet sees revenue slowing for the third consecutive quarter, increasing 7.5% to $21.79 billion.
Wall Street projects Disney's total subscribers across Disney+, Hulu and ESPN+ to jump 13% from last year to 238.88 million. The number of streaming subscribers totaled 234.7 million in Q1.
Analysts expect Disney+ subscribers to increase to 163.51 million from 161.8 million last quarter. Analysts forecast ESPN+ and Hulu to add about 1 million subscribers over the quarter to 25.95 million and 48.8 million, respectively.
Parks, Experience and Products revenue sales are expected to surge 14% year-over-year to $7.6 billion. Analysts see Disney Media and Entertainment revenue climbing 3.6% to $14.15 billion.
For the rest of the year, consensus views see the Burbank, Calif.-based company's earnings turning higher and ending up 16% for the fiscal year and 21% (calendar year) over 2022. Fiscal year revenue is expected to rise about 9%.
Disney Stock
Disney stock drifted lower Tuesday after a two-day advance. DIS shares have leapt 19% so far this year.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison
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Source: Investor's Business Daily
