Disney Blockbusters Expected to Ring up Earnings Hike Despite Weakened ESPN

Walt Disney (DIS) - Get Report , riding an unprecedented string of box office blockbusters, is expected to report strong earnings Tuesday on the strength of its studio, overcoming weakening ratings at its ABC network and sports cable behemoth ESPN. Analysts expected the media giant to report earnings of $1.40 a share, a 14% hike from last year, on $13.2 billion in revenue, an increase of 5.9%.

Disney continued in the quarter to rake in ticket sales from Star Wars: The Force Awakens, which was released last year but has generated $2.1 billion in ticket sales and played until mid-April. In its most recent quarter, the company released animated film Zootopia, which passed $958 million in worldwide sales, according to the Box Office Mojo website.

The company's consumer products operation also is expected to see robust hikes thanks to sales of Star Wars and Zooptopia merchandise.

Less clear is the state of Disney's ESPN sports cable channel, which lost 7 million of its 99 million subscribers over the past three years through the end of Disney's last fiscal year, Disney said in its annual report. CEO Bob Iger told analysts during the company's last earnings call that executives saw an "uptick" in the numbers of subscribers, but he wouldn't elaborate.

Wall Street analysts are bracing for further subscriber losses as consumers increasingly continue to choose cheaper cable and satellite TV packages that don't include ESPN or drop their pay-TV services altogether.

Disney's brace of ESPN sports channels are the largest part of its cable unit, which last quarter accounted for 28% of the company's operating earnings. The company's cable operations declined by 5% in that quarter.

Disney may not share in the advertising boom that has so far buoyed the earnings of CBS (CBS) - Get Report, Time Warner (TWX)  , Discovery Communications (DISCA) - Get Report and other large media companies, MoffettNathanson senior analyst Michael Nathanson said.

He predicted that Disney's cable advertising declined by 13.5% in the first quarter due to ESPN's nearly 16% ratings drop and that ad sales at its broadcasting unit fell by 4.2% because of ABC's ratings weakness. The network's ratings have fallen 18% so far this season among the 18- to 49-year-old viewers that advertisers crave, according to ratings compiled by Nielsen Media Research.

Disney's cable earnings likely will increase in the quarter, however, due to the timing of some of its pricey sports programming costs.

Nathanson also increased his earnings expectations for Disney's theme park unit, which provides 24% of the company's operating earnings, despite costs of as much as $300 million to prepare for the June 16 opening of its 43% owned Shanghai Disneyland park. Nathanson cited continued strength at its U.S. theme parks and price hikes that will more than offset currency headwinds at the foreign parks.

This article is commentary by an independent contributor. At the time of publication, the author held positions in Disney and CBS.