When Walt Disney (NYSE:DIS) reports its second quarter results on Tuesday, investors will closely look at the media giant’s streaming business along with updates on password sharing crackdown and transition to sports.
Wall Street expects the media giant to post Q2 EPS of $1.11, implying a rise of 19.4%, while revenue is expected to grow 1.5% to $22.15 billion.
Following rival Netflix’s footsteps, Disney said it will start password crackdown from June, CEO Bob Iger said in April, as the company looks to make its streaming business profitable and boost subscribers’ growth.
The company’s streaming business faces headwinds amid intense competition and the pressure from price hikes. However, Iger said that the company’s streaming business remain poised to reach profitability by the end of this year and that it would “eventually” aim for double-digit margins.
“We think Disney+ paid sharing will benefit FY25-26 net adds, derisking subscriber sentiment,” said Wells Fargo analyst Steven Cahall.
Earlier in February, Disney posted first quarter results that landed on the high side of profit expectations and offered upbeat guidance for 20% growth in full-year profitability.
Over the last two years, DIS has beaten EPS estimates 63% of the time and has beaten revenue estimates 38% of the time.
With the end of Disney’s proxy fight with Nelson Peltz and the company’s plans to move towards sports, Morgan Stanley thinks management will focus on operational excellence, financial rigor, management succession, and the implementation of a consistent long-term strategy.
Earlier in February, Disney said it would take a $1.5 billion stake in Epic Games and added that it plans to launch its ESPN streaming service in 2025.
Investors will also focus on Disney’s content slate and the performance of its theme parks business. Brokerage KeyBanc said it sees domestic experiences revenues of $5.48 billion, below consensus of $5.79 billion.
Seeking Alpha and Wall Street are bullish and rated the stock a Buy. However, Seeking Alpha’s Quant ratings are cautious and consider it a Hold.
The stock has risen 26% so far this year, outperforming the over 7% rise in the broader S&P500 Index.
Over the last three months, EPS estimates have seen 11 upward revisions, compared to four downward revisions, while revenue have been revised upwards four times versus 11 downward moves.