Walt Disney Co. Faces Uncertain Challenges Ahead of Q3 Earnings

Disney Chief Executive Robert Iger, renowned for his leadership skills in guiding the company's growth over the years, is tasked with navigating through a series of challenges that impact almost every segment of the business. As Disney prepares to report its fiscal third-quarter earnings, here are some key factors to watch out for.

Earnings

According to analysts tracked by FactSet, Disney is expected to report adjusted earnings of 97 cents per share, a decrease from $1.09 per share reported last year. Meanwhile, Estimize, a platform that crowdsources projections from hedge funds and academics, also predicts earnings of 97 cents per share.

Revenue

The FactSet consensus calls for $22.5 billion in revenue, showing a slight increase from the previous year's $21.5 billion. Contributors on Estimize are aligned with this projection, anticipating $22.5 billion in revenue.

Stock Movement

While Disney shares have remained relatively stable throughout the year, the S&P 500 index has experienced a significant 16% increase in 2023.

Of the 30 analysts tracked by FactSet who cover Disney shares, 18 recommend buying, 8 advise holding, and only one has a sell rating. The average price target stands at $112.26.

What to Watch For

Wall Street analysts express apprehension as they brace themselves for a potential onslaught of challenges facing Disney. Some of these concerns include lower linear-TV advertising sales, the future of ESPN amid uncertainty, potential leakage of Disney+ subscriptions, a decrease in park attendance, the ongoing writers' and actors' strike, and a political dispute with Florida Governor Ron DeSantis.

Cautioning investors, Gimme Credit analyst Dave Novosel warns that the operating margins have been decreasing over the past two quarters and may continue to do so for the remainder of the year.

"While selling the TV assets may align with Disney's strategic goals, the question remains: who would be interested in acquiring them?" questioned Novosel. "We don't see any obvious potential buyers, and even if there were, what price would these assets command?"