JPMorgan’s Alexia Quadrani and team explain why they’re bullish on Walt Disney (DIS) heading into earnings:
Zootopia Associated Press
We are raising our estimates for Disney ahead of FQ2 earnings, primarily driven by the outperformance of Zootopia, which has generated $296m in domestic box office receipts and $853m globally to date and we expect has further positive implications for Consumer Products in particular in the future. In addition, we believe early widespread positive reviews for The Jungle Book, opening in theaters this weekend, has further positive implications for the studio and therefore modestly raise our FQ3 estimates as well. At the other divisions, we believe trends remained steady with a potential slight positive at Cable from the inclusion of Disney networks in Sonys Playstation Vue offering in early March as well as the strong scatter market YTD. We believe Parks trends remained healthy domestically as the company continues to look for ways to leverage pricing structures (dynamic pricing, early entry passes) to both increase profitability as well as limit overcrowding. At international, we expect incremental details for Shanghai Disneyland in the coming months ahead of the parks opening in mid-June. Finally, we believe Consumer Products is likely to continue to benefit from strong Star Wars sales as well as new properties such as Zootopia and The Jungle Book later in the year. Our FQ2 EPS increases to $1.42 from $1.40 prior, while our F2016E EPS increases to $5.80 from $5.76. With an ongoing impressive success rate at the Studio, better subscriber trends, and a particularly positive outlook at the Parks, we reiterate our Overweight rating and $118 year-end price target for Disney as one of our top picks in Media.
Shares of Disney have gained 2% to $99.32 at 2:24 p.m. today, leaving 19% upside to JPMorgan’s $118 target.
