Walt Disney Company (DIS) Earnings Preview 2014: Ebola Can’t Keep A Good Mouse Down

The U.S. Ebola scare has stirred some anxiety among shareholders of travel-dependent stocks, including the Walt Disney Company, whose parks & resorts division now accounts for about 22 percent of its stock price. But so far, it looks as if outbreak concerns were only a minor blip in an otherwise stellar year at the Mouse House.

While Disney shares did fall in September and October, hitting a low of $81.74 on Oct. 16, they’ve already bounced back, trading at $90.11 midday on Tuesday. And if analysts’ projections are any indication, Disney’s earnings report on Thursday will have shareholders singing “Zip-A-Dee-Doo-Dah,” with a double-digit jump in fourth-quarter and full-year profits.

Wall Street expects the Burbank, California, company to show a 14.7 percent increase in quarterly net income: $1.54 billion, or 88 cents per share, compared with $1.42 billion, or 77 cents per share, for the same period last year. Analysts polled by Thomson Reuters expect Disney’s revenue to rise 6.9 percent year over year, to $12.37 billion, for the three-month period ended Sept. 30; last year's fourth-quarter revenue was $11.57 billion.

Analysts expect Disney to show full-year net income of $7.58 billion, or $4.31 per share, an increase of 27 percent over the $6.16 billion, or $3.39 per share, reported in 2013. The company’s full-year revenue is projected to rise 8.2 percent year over year, to $48.76 billion.

A Walk In The Parks

Fears were out there that Ebola-related anxiety could slow travel and therefore hurt Disney theme parks and cruise ships. While those concerns have certainly manifested on the numerous parenting blogs and travel-related message boards, Disney’s parks & resorts unit is in a strong position to weather any Ebola-related blips, and the division has been on a roll during the last year and a half. According to Jeffrey S. Thomison, an analyst with Hilliard Lyons, operating income for the segment rose 20 percent, to $1.98 billion, for the nine-month period ended June 28.

Moreover, Disney has been investing heavily in high-tech infrastructure to increase average per-guest spending at its theme parks. Most notably, it rolled out the MyMagic+ system at Walt Disney World in Florida earlier this year. Analysts expect those investments to begin paying off in this quarter for the parks & resorts unit. “[T]he segment is finally expected to show positive contributions from MyMagic+,” Marci Ryvicker, an analyst with Wells Fargo, said in a research note last month.

And the future only looks brighter. Disney, never one to miss a lucrative tie-in opportunity, has recently begun construction on a Disney World attraction related to the hit “Frozen,” which is already the highest-grossing animated movie of all time.

Movies And Merchandise

Analysts say that much of Disney’s fourth-quarter profits were driven by its studios division. The segment accounts for only about 9.3 percent of Disney’s total stock price, but it benefited from the runaway theatrical hit “Guardians of the Galaxy.” Released in early August, the movie brought in more than $765 million worldwide, making it the highest-grossing movie of the year.

Other Disney-owned franchises are spilling into the company’s consumer products unit, which accounts for about 15.4 percent of Disney’s stock price. “The consumer products segment has also been on a roll, with Frozen, Spider-Man, and Disney Jr. products driving substantial margin increases over the last three quarters,” Ryvicker said.

Disney will report fourth-quarter and full-year financial results after the bell on Thursday. A live webcast is scheduled for 5 p.m. EST with Chairman and CEO Robert Iger.

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