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ESPN Struggles On: Goldman Sachs Reviews Disney's Q4

ESPN Struggles On NYSE:DIS: Goldman Reviews Disney's Q4

There are a couple of “silver linings” for the company, Goldman Sachs’ Drew Borst said in a report. He reiterated a Neutral rating on Disney, while raising the 12-month price target from $108 to $109.

The company reported quarterly EPS at $1.10, below consensus expectations of $1.16. Borst reduced the EPS estimates for 2017, 2018 and 2019 by an average of 2 percent to $5.84, $6.62 and $6.95, respectively, citing lower Cable Network and Theme Park operating income.

FQ4 Review

“This was only the second quarter in the past five years that DIS missed consensus EPS,” Borst noted. While operating Income growth was flat in Q4, EPS grew 3 percent year-over-year. Growth was impacted by the disappointing box office performance of Pete’s Dragon and the low growth of 1 percent in Cable Nets due to weak ads.

ESPN ad revenue declined 13 percent in Q4, “reflecting lower Daily Fantasy Sports advertising, the 53rd week comp, and competition from the Olympics,” the analyst wrote, adding that ESPN ad sales were trending lower in Q1 “due to the timing of college football games.”

Silver linings

Borst mentioned a couple of silver linings for Disney:

  • Shanghai had four million visitors in four months, and the company expects Shanghai to be breakeven in 2017, a year ahead of estimates.
  • Disney plans to repurchase $7-$8 billion in shares in 2017, higher than the Goldman Sachs estimate of $3.2 billion. This increase translates to $0.07, or 1 percent higher EPS.
DateFirmActionFromTo
Nov 2016BarclaysUpgradesUnderweightEqual-Weight
Nov 2016Pivotal ResearchDowngradesBuyHold
Oct 2016Credit SuisseMaintainsOutperform

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