While this earnings season continues to show broad-based strength like the last couple of quarters, The Walt Disney Company (DIS – Free Report) disappointed investors by missing on both the top and bottom lines.
Earnings in Focus
Earnings per share came in at $1.87, missing the Zacks Consensus Estimate by 10 cents but increasing from the year-ago earnings of $1.58. Revenues grew 7% year over year to $15.2 billion and fell short of the estimated $15.49 billion. Studio Entertainment is a major contributor to revenues, having grown 20% on the back of the huge success of Avengers: Infinity War and Incredibles 2 as well as continued strong performance of Black Panther and the Solo: A Star Wars Story. Revenues at Media Network and Parks and Resorts increased 5% and 6%, respectively.
Walt Disney Co. won the U.S. approval to buy Twenty-First Century Fox Inc(FOXA – Free Report). entertainment assets for $71.3 billion on the condition that it sells Fox’s 22 regional sports networks, giving Disney an edge over Comcast Corp’s (CMCSA – Free Report) competitive bid. This is being done to boost the Disney branded streaming service set to launch in late 2019.
Market Impact
Following the earnings announcement, shares of Disney fell nearly 2% in aftermarket hours. The stock currently has a Zacks Rank #4 (Sell), indicating some pain in the near term. However, Disney has a top VGM Score of A and belongs to a top-ranked Zacks industry (top 29%).
The rough trading could spread into the ETF world, especially funds having the largest holdings to this media and entertainment conglomerate.
iShares Evolved U.S. Media and Entertainment ETF (IEME – Free Report)
The fund is actively managed and seeks to provide access to U.S. companies with media and entertainment exposure. The fund has 75 holdings and Walt Disney occupies the top position with 6.9% share. The fund has AUM of $5.3 million and an expense ratio of 0.18%.
