Wall Street Analysts Respond To Disney's Q1 Earnings Report

The first-quarter results of Walt Disney Co DIS were weighed down by tough comparisons from "Star Wars: The Force Awakens" and weak ESPN numbers. Disney’s first-quarter earnings topped Street view while weakness in ESPN ad revenues dragged down sales below consensus estimate.

Positives And Negatives

Among the positives, theme parks showed strong revenue growth and off to a strong start in 2017, coupled with solid performance at Broadcasting unit. Moreover, CEO Bob Iger’s willingness to stay on post his planned June 2018 retirement also limited some downside to the shares.

On the flip side, the company’s Cable networks' revenue and operating income fell short of expectations due to lower content licensing revenue and/or lower affiliate revenue. Results from studio and consumer products units also lagged behind estimates.

But, most Street analysts has a positive bias on the stock, driven by resumption of growth in 2018 and Disney’s slate of upcoming films.

The company’s upcoming film slate offers some hope. The films include the "Beauty & the Beast" live action film (March 17), "Guardians of the Galaxy 2" (May 5), "Pirates of the Caribbean 5" (May 26), "Cars 3" (June 16) and "Star Wars Episode VIII" (December 15).

Loop Capital And Deutsche Bank Commentary

David Miller of Loop Capital maintains his Buy rating on the stock and commented that the results of the core media networks’ “not bad considering tough compare.”

Miller was also upbeat on Theme Park results despite the closure of the Orlando complex for 2+ days in early October due to Hurricane Matthew.

“We note last year's FQ2 Park results saw revenues increase 4.5 percent, with EBIT up 10.2 percent, so the +2.0 percent data point is a huge positive in our view,” Miller wrote in a note.

Meanwhile, Bryan Kraft of Deutsche Bank said though content licensing within the cable networks segment is volatile from quarter-to-quarter, advertising appears to be improving in the second quarter. As such, the quarter's poor performance doesn't necessarily have a negative impact in the coming years.

In addition, Kraft is positive on the Consumer Products segment given easier comps ahead and the strong slate of theatrical release of key films, including "Beauty and The Beast," "Cars 3" and "Spiderman: Homecoming."

Kraft also maintains his Buy rating on the shares, with an unchanged $112 price target.

In addition, the Street raised its price target on Disney shares to $120 from $110 on expectations that the tone of the underlying business should improve throughout the year. However, the Street said it's not enough to warrant committing fresh capital at current levels.

Other Voices From The Street

The Street also listed out some key comments of various Street analysts:

Omar Sheikh of Credit Suisse said investor focus will likely remain on a re-acceleration of growth across the group in 2018 and beyond. Goldman Sachs’ Drew Borst too not perturbed by the results as the operating income declined by only 7 percent year-over-year despite myriad of headwinds and one-time items.

At last check, shares of Disney were up 0.28 percent to $109.31.