Walt Disney Co.'s (DIS) earnings results come on Thursday and should reveal a lot about the company's future, which is prompting a "wait and see" approach from investors.
The stock is nearly flat in early trading Thursday morning as the market anticipates updates on subjects ranging from the integration of Twenty-First Century Fox (FOXA) assets, the progress of ESPN+, and the company's 2019 outlook, especially in regard to its over the top (OTT) challenge to Netflix (NFLX) with Hulu and "Disneyflix."
The number of uncertain factors is causing investors to tread lightly ahead of the earnings report after the closing bell as they await more clarity from CEO Bob Iger.
"We still want to press caution in Disney," Jim Cramer's Action Alerts PLUS team wrote in their preview on Wednesday. "We remain bullish on the long-term potential of its direct to consumer products, however Rome wasn't built in a day and it is going to take time and upfront dollars to develop the products and turn them into the household staples we expect them to be." (Disney is an Action Alerts PLUS holding.)
By raw numbers, the company will need to prove it can hit Wall Street estimates after missing three times in 2018, which has taken the stock slightly lower each time.
Analysts covering the stock are expecting adjusted earnings of $1.35 per share on revenue of $13.7 billion.
While the company has had trouble clearing the bar set by analysts in 2018, the estimates for the September quarter are substantially reeled in from the $1.87 in EPS and $15.3 billion in revenue produced last quarter, which might help Iger's efforts to lead the stock higher.
A beat on the top and bottom lines for the first time this year could act as a catalyst to take the stock higher in the near term, but the longer-term thesis will depend much more on guidance and comments on future projects.
That long-term view is the rub for analysts and investors due to Disney's many moving pieces looking ahead.
"Forecasting Disney's forward earnings has never been easy, in part, because they company eschews guidance and a significant component of earnings is driven by somewhat unpredictable content cycles in filmed entertainment and consumer products," MoffettNathanson analyst Michael Nathanson said. "Heading into fiscal year 2019, this assignment becomes even more difficult due to Disney's pending acquisition of 21st Century Fox as well as the planned launch of the Disney direct-to-consumer (DTC) service at year-end 2019."
Adding to the difficulty identified by Nathanson will be the progress of ESPN+ and Disney's premium TV progress sans SkyTV after losing a bidding war to Comcast (CMCSA) .
ESPN+, the company's streaming option for sports, saw solid progress in its first reported quarter in August. The company will look to carry that forward, but again many of its key catalysts such as its streaming deal with the Ultimate Fighting Championship are not due to come in until 2019.
The number of forward-looking variables could be much more impactful than any simple earnings beat and comments for the prior quarter.
With so much still unknown ahead of the release that will impact the investment thesis for the company, many investors are demanding proof before diving into Disney.
A press release detailing earnings will be available here after-market, to be followed by a conference call at at 4:30 p.m. ET.