It’s almost time for Walt Disney (NYSE:DIS) to step up to the earnings plate. Once the trading action stops today (Wednesday, November 8), the entertainment behemoth will deliver its fiscal fourth quarter of 2023 print.
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The report arrives during a period of transformation at the House of Mouse. For the first time, the company is going to provide separate financial reports for its entertainment and sports divisions. This change follows the split of the Disney Media and Entertainment Distribution (DMED) business into two distinct segments. The company will now have three main reporting segments: Entertainment, Sports, and Experiences.
On the back of the restructuring, Morgan Stanley analyst Benjamin Swinburne has made some changes to his DIS model. “Overall,” says Swinburne, “our estimates come down modestly (LSD%) on a more cautious linear TV entertainment advertising view and lower expected film performance for upcoming titles.”
For FY23, excluding the lost Charter profits, Swinburne sees segment EBIT growing ~7%. Looking ahead, boosted by Experiences segment growth and a big improvement for Entertainment DTC (direct to consumer) losses, offset somewhat by Entertainment Linear network declines, in FY24, the analyst forecasts segment OI (operating income) growth of +15-16%.
On the more long-term outlook, from FY23-FY27, Swinburne sees a +20% adjusted EPS CAGR (compound annual growth rate) with Disney’s asset mix potentially benefiting from some “strategic action” on the company’s side.
Operation-wise, the analyst would like to see how Disney plans to reduce expenses. Simultaneously, on a strategic level, Swinburne is keeping an eye out for new joint venture partners for ESPN to support the launch of its DTC (direct-to-Consumer) platform.
“We see the investment opportunities at Experiences (fka Parks) as generating high returns,” the 5-star analyst goes on to add, whilst also anticipating Disney Plus to reach profitability later in FY24. At the same time, Swinburne remains “focused on evidence of pricing power and advertising revenue growth in quarters ahead.”
All told, Swinburne remains in the Disney bull camp, reiterating an Overweight (i.e., Buy) rating, backed by a $105 price target. The implication for investors? Upside of 24% from current levels. (To watch Swinburne’s track record, click here)
And where does the rest of the Street stand ahead of the print? Based on an additional 17 Buys, 5 Holds and 1 Sell, the stock claims a Moderate Buy consensus rating. The $105.62 average target closely resembles Swinburne’s objective. (See Disney stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
