Walt Disney Company (NYSE: DIS) reports
fiscal fourth-quarter earnings after market close on Thursday, Nov. 8.
For the quarter, DIS is expected to report adjusted EPS of $1.34, up from $1.07 in the prior-year period, on revenue of $13.73
billion, according to third-party consensus analyst estimates. Revenue is projected to grow 7.5 percent year over year.
Of the $13.73 billion estimate for this quarter, analysts project $5.71 billion in revenue from the Media Network segment, $5.08
billion from Parks and Resorts, $1.78 billion from Studio Entertainment and $1.16 billion from the Consumer Products and
Interactive Media division.
Over the course of the quarter, the company has continued to make progress on its acquisition of entertainment assets from 21st
Century Fox (FOXA). The latest update was Tuesday when the European Commission granted conditional approval, provided DIS divests
of certain TV assets, such as A+E Television Networks and the History Channel. DIS already got approval from the U.S. Justice
Department in June, which included the condition that it sell Fox’s regional sports networks.
Since CEO Bob Iger spent almost all of his time on last quarter’s earnings call discussing the rationale and strategy behind the
acquisition, he might focus more on the company’s plans post-acquisition. DIS did just announce specific FOXA film executives that
would join its Studio Entertainment management team, pending the closing of the acquisition.
The Studio Entertainment division has been a driver of DIS’ top and bottom-line growth in recent quarters. In its most recent
report, the segment grew the fastest and was up 20 percent year over year to $2.88 billion, while operating income increased 11
percent to $708 million.
Questions About Streaming Services
This has been one area that analysts and investors have honed in on for a while. CEO Iger has made it clear that one reason
behind the FOXA acquisition was to help build out the company’s content portfolio for its late-2019 launch of direct-to-consumer
(DTC) streaming service. Outside of a few details though, there isn’t a whole lot that analysts and investors know about the
service.
That’s not the only streaming service DIS has its hands in. The FOXA acquisition would also give DIS 60 percent ownership of
streaming service Hulu, with Comcast Corporation (NASDAQ: CMCSA) and AT&T Inc. (NYSE: T) owning the remaining chunk.
Some analysts think DIS might not be able to purchase the remaining stakes it doesn’t own. And with its own streaming service
planned, plus the ESPN+ streaming service launched earlier this year, some have questioned how Hulu fits into the overall
strategy.
The ESPN+ streaming service that was launched in April 2018 is likely to be another area analysts are looking for more
information on today’s call. That move was made to help offset declining subscribers for ESPN’s traditional-TV channels and so far
management has only said that subscriber numbers had exceeded their expectations.
Disney 5 Year Chart. DIS has been getting back within striking distance of its all-time high of $122.08 from
mid-2015. That $120 to $122 area has been a big resistance level for DIS and it has come close to it this year, but so far hasn’t
been able to break above it. Chart source: thinkorswim® by TD Ameritrade. Not a recommendation. For illustrative
purposes only. Past performance does not guarantee future results.
Disney Options Activity
Options traders have priced in about a 3 percent stock move in either direction around DIS’ earnings release, according to the
Market Maker Move indicator on the thinkorswim® platform. Implied volatility is at the 51st percentile as of this morning, lower
than historical volatility, which is at the 85th percentile.
In short-term trading at the Nov. 9 weekly expiration, calls have been active at the 115 and 116 strike prices. There has also
been higher volume at the 120 and 121 strikes, just above the stock’s 52-week high of $119.69. On the put side, recent activity has
been mostly at the 114, 115 and 116 strike prices.
At the Nov. 16 monthly expiration, calls have been active at the 115 and the 120 strikes, while puts have been active at the 115
and 117 strikes. Open interest is also high at the 120-strike put, right about where the stock was trading a few weeks
back.
Over the next several months of expiration, there has been heavier volume and open interest between the 120 strike and the 130
strike on the call side. The positioning typically suggests traders expect the stock to run a ways if it’s able to get through that
long-term resistance.
Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over
a set period of time. Put options represent the right, but not the obligation to sell the underlying security at a predetermined
price over a set period of time.
Information from TDA is not intended to be investment advice or construed as a recommendation or endorsement of any particular
investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each
strategy, including commission costs, before attempting to place any trade.
© 2018 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.