|After performance worthy of a fairy tale, how much more upside movement is left in Disney stock?|
Wall Street is expecting earnings of 55 cents per share, which would represent a 12% increase from the same period of a year ago on revenues of $9.56 billion, or up 5.4% from the prior year. The company should have no problem beating these numbers, as several of its rivals, including Time Warner, CBS as well as Viacom (VIA) have produced solid increases across the board in not only revenues but also better-than-expected margins -- all of which attributed the performances to better-than-expected advertising growth, distribution revenues as well as content licensing. In particular, Time Warner, one of Disney's principal broadcast competitors, reported an increase of 6% in adjusted operating income to reach $1.35 billion, while operating margin expanded 30 basis points to 19.4%. It also reaffirmed its double-digit growth expectation for the balance of this year. So it is doubtful Disney will show any signs of weakness, but I will be looking to see how the company plans to expand its brand and geographic footprint outside of the U.S. In March, the company launched a broadcast satellite channel in Japan targeting women and families. It said it expected $17.5 million of the $35 million in investment costs to go toward that initiative and count toward Q2 expenses. Though it did not offer a whole lot with regard to its plans to grow that channel as part of its overall portfolio, it certainly intrigues me to learn the progress of that endeavor and its impact on overall growth, as it is certain to also drive incremental expenses during the quarter. Bottom line
Disney's brand, which includes parks, resorts, cruise ships and a host of other businesses, is well known around the world. It doesn't take much convincing to become bullish on Disney, as the company has a track record of delivering strong performances. I would be slightly cautious at these levels, though -- particularly with respect to its recent run. Investors need to ask themselves: What exactly can the company report Tuesday that will offer an more surprise to the upside? I just don't see it. All of the good news is likely priced in, and investors wanting to get in on Disney should wait until after earnings and look for an entry level at $40 and possibly $38 -- representing the midpoint of the 100- and 200-day moving average.