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The Walt Disney Company DIS is slated to report second-quarter fiscal 2025 results on May 7.
The Zacks Consensus Estimate for revenues is pegged at $23.14 billion, suggesting modest growth of 4.78% from the year-ago quarter’s reported figure.
The consensus mark for earnings has moved south by a penny to $1.18 per share over the past 30 days, indicating a decline of 2.48% year over year.
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In the last reported quarter, Disney delivered an earnings surprise of 22.22%. The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 12.67%.
The Walt Disney Company Price and EPS Surprise
The Walt Disney Company price-eps-surprise | The Walt Disney Company Quote
Earnings Whispers for DIS
Our proven model does not predict an earnings beat for Disney this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
DIS has an Earnings ESP of -1.48% and a Zacks Rank #4 (Sell) at present.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Shaping Upcoming Results
As Disney approaches its second-quarter fiscal 2025 earnings report, several concerning factors suggest investors may want to consider reducing exposure to the stock despite some positive developments in its streaming and content businesses.
Disney's Entertainment segment saw strong performance in the fiscal first quarter, with the segment generating $1.7 billion in operating income, representing a substantial 95% increase year over year. However, this momentum may be difficult to sustain. In the fiscal second quarter, Disney expects its Sports segment operating income to be adversely impacted by approximately $100 million due to college sports costs, including the shift of three College Football Playoff games from the previous quarter into the fiscal second quarter and one additional NFL game. Disney also guided that the fiscal second-quarter will be unfavorably impacted by a write-off of more than $50 million as a result of exiting the Venu joint venture.
Our model estimates for Entertainment revenues (which include Linear Networks, Direct-to-Consumer and Content Sales/Licensing and Other Revenues) are pegged at $10.31 billion, indicating an increase of 5.2% year over year.
The Experiences segment, which includes Disney's theme parks and cruise line business, also faces challenges. For the fiscal second quarter, Disney Cruise Line pre-opening expenses of more than $40 million are expected to have weighed on results. For the full fiscal year, total pre-opening expenses related to Disney Cruise Line expansion are projected to reach more than $200 million. These expenses represent significant near-term costs without immediate revenue offsets.
Our model estimate for the Experiences segment (renamed from Disney Parks, Experiences and Products) revenues is $8.93 billion, indicating 6.4% growth year over year.
While Disney's streaming services appear to be gaining traction with the ESPN tile on Disney+ showing encouraging early indications and fiscal first-quarter Entertainment Direct-To-Consumer results reflecting improved profitability with nearly $300 million in operating income, continued subscriber growth remains uncertain. For the upcoming results, management expects a modest decline in Disney+ subscribers compared to the fiscal first quarter, suggesting ongoing challenges in maintaining subscriber momentum.
The company's recent ventures into original programming for Disney+, such as the new daily sports show SC+ and the 24/7 Simpsons stream, represent strategic investments that may not yield immediate returns. Meanwhile, the recent transaction to combine Hulu+ Live TV assets with fuboTV creates additional integration complexity and execution risk.
Disney's acquisition of a 70% stake in Fubo will require regulatory approvals and Fubo shareholder approval, introducing uncertainty around timing and potential regulatory hurdles. This transaction, while potentially beneficial long-term, represents one of several moving pieces in Disney's complex business transformation.
From a financial perspective, Disney delivered strong consolidated first-quarter fiscal 2025 results with 44% growth in diluted earnings per share excluding certain items, 5% growth in revenues, and 31% growth in total segment operating income. However, these results might have set expectations too high for the fiscal second quarter, given the aforementioned headwinds.
Looking forward, management continues to expect high-single digit adjusted EPS growth for fiscal 2025 compared to fiscal 2024, but achieving this target depends on successful execution across multiple fronts. Given the anticipated challenges and valuation concerns in the fiscal second quarter, investors should consider taking profits ahead of earnings and potentially re-establishing positions at more favorable entry points after gaining greater clarity on Disney's trajectory for the remainder of fiscal 2025.