by Ray Keating
Analysis
DisneyBizJournal.com
February 2, 2023
The Walt Disney Company will release its next earnings report for the quarter ended in December 2022 after the stock market closes on Wednesday, February 8, 2023.
Whether it be Disney or another publicly traded company, people often are baffled with how a company’s stock trades after earnings are announced. So, it’s important to understand what a company’s stock price reflects or captures. I explained it this way in my book The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist:
[S]tock prices reflect the level of confidence in the decisions being made for the business. This provides information to current investors, to those considering investment, and to the company board in terms of management compensation being tied to performance. Indeed, this is why top management’s compensation at a company often is tied, in part, to stock options. A stock option is the right to buy a certain number of shares of a corporation at a particular price. So, if the company performs well and the stock price rises, the options will be valuable, and vice versa if the company and stock price perform poorly.
So, the stock price is tied to the future performance – that is, earnings or cash flow – of that particular company. Of course, all kinds of factors – both internal and external to the firm – can and will affect stock prices, and expectations regarding such factors can change, sometimes quite quickly, and will differ among market participants.
When talking about future earnings or cash flow, expectations naturally matter in terms of a stock’s price. So, when an earnings report, and the related earnings call with top management, align with prior market expectations, the price of the stock will be little affected. And if the earnings report “beats expectations,” the stock price will rise accordingly, and in contrast, when earnings fall short of expectations, the price will fall.
What do market expectations look like for Disney heading into the company’s earnings report and call next week?
Zacks Equity Research reports the following in a piece at Yahoo! Finance:
• “This entertainment company is expected to post quarterly earnings of $0.69 per share in its upcoming report, which represents a year-over-year change of -34.9%. Revenues are expected to be $23.33 billion, up 6.9% from the year-ago quarter.”
• “The consensus EPS estimate for the quarter has been revised 8.3% lower over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period.”
• “For Disney, the Most Accurate Estimate [i.e., ‘a more recent version of the Zacks Consensus EPS estimate’ with the idea being ‘that analysts revising their estimates right before an earnings release have the latest information’] is lower than the Zacks Consensus Estimate, suggesting that analysts have recently become bearish on the company's earnings prospects… On the other hand, the stock currently carries a Zacks Rank of #4. So, this combination makes it difficult to conclusively predict that Disney will beat the consensus EPS estimate.”
A great deal has happened since Disney’s last earnings release on November 8, including, of course, CEO Bob Chapek being fired on November 21, with Bob Iger returning to that role.
As noted in the above chart, Disney’s stock price stood at $99.90 on November 8, sank to $84.17 on December 28, and closed at $109.39 on February 1, 2023.
In coming days, DisneyBizJournal will look at various other factors in play influencing Disney and its stock.
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Ray Keating is the editor, publisher and economist for DisneyBizJournal.com; and author of the Pastor Stephen Grant thrillers and mysteries, and the Alliance of Saint Michael novels; and assorted nonfiction books. Have Ray Keating speak your group, business, school, church, or organization. Email him at raykeating@keatingreports.com.
The views expressed here are his own – after all, no one else should be held responsible for this stuff, right?
Consider books by Ray Keating…
• The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist. Signed paperbacks at RayKeatingOnline.com or paperbacks, hardcovers and Kindle editions at Amazon.com.
• Cathedral: An Alliance of Saint Michael Novel. Signed paperbacks and/or paperbacks, hardcovers and the Kindle edition at Amazon.
• The Pastor Stephen Grant thrillers and mysteries. The latest in the series is Persecution: A Pastor Stephen Grant Novel. Get the signed books here, or paperbacks and Kindle editions right here.
• The Lutheran Planner: The TO DO List Solution combines a simple, powerful system for getting things done with encouragement, inspiration and consolation from the Christian faith.
• Behind Enemy Lines: Conservative Communiques from Left-Wing New York – signed books or at Amazon.
• Free Trade Rocks! 10 Points on International Trade Everyone Should Know is available at Amazon in paperback or for the Kindle edition, and signed books at www.raykeatingonline.com.
Also, check out Ray’s podcasts – the Daily Dose of Disney, Free Enterprise in Three Minutes, and the PRESS CLUB C Podcast.
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