Investors Await Disney TV Update -- WSJ

Walt Disney Co. investors will be paying more attention than ever to the media giant's huge but challenged television business as the company reports fiscal second-quarter financial results Tuesday.

The future of Disney's TV division, particularly ESPN, has long been the focus of anxious Wall Street analysts since its growth started slowing two years ago amid subscription declines for pay-cable packages. Wariness is even higher now, though, after a top executive at Time Warner Inc. last week warned about an advertising slowdown and after the biggest-ever first-quarter decline in pay TV subscriptions.

Investors will want to know whether the many deals Disney has signed with low-price "slim" internet TV bundles like YouTube TV are ameliorating subscriber declines. They also will be looking for an update on the "over-the-top" digital ESPN product Disney has said it would launch by the end of the year.

The company's theme-parks unit is also likely to get attention at the one-year anniversary of Shanghai Disney Resort approaches in June. Investors will want an update on the park's performance -- particularly whether it is on track to meet its goals of 10 million visitors and break-even financial results.

Wall Street may also want to set expectations for the new "Avatar"-themed land opening at the Animal Kingdom park at Walt Disney World in Orlando this month and whether it could help maintain growth in the domestic parks business, which has been on a tear recently.

After a monster fiscal 2016, Wall Street has been expecting a comparatively slow 2017 from Disney's film business. It is releasing only eight films, compared with 13 the prior year -- two of which were on behalf of partner DreamWorks, under a deal that has expired -- and 11 in the next.

But with March's "Beauty and the Beast" grossing $1.1 billion-plus and "Guardians of the Galaxy Vol. 2" on its way to a total nearly that big, following the hits "Rogue One," "Moana" and "Doctor Strange," declines at the studio could be quite minor after all. Investors will want to know what impact "Beauty" is having on the movie studio and consumer products this year before contemplating what looks like a few blockbuster years to come, with an accelerating pace of Marvel and "Star Wars" films as well as a "Frozen" sequel.

Tuesday will be the first earnings call since Chief Executive Robert Iger in March extended his contract for another year, to July 2019. Though Mr. Iger has previously been tight-lipped on earnings calls about the search for a successor, analysts may nonetheless ask about progress in figuring out who will be running the world's biggest media conglomerate in two years.

Disney is expected to report net income of $1.41 a share for the quarter, according to the consensus of analysts surveyed by Thomson Reuters, compared with $1.30 a share a year earlier. Revenue is expected to be $13.45 billion, up from $12.97 billion a year ago. Disney doesn't provide earnings guidance.

Write to Ben Fritz at ben.fritz@wsj.com

(END) Dow Jones Newswires

May 08, 2017 02:47 ET (06:47 GMT)