Disney Looks for Improvement at ESPN -- Earnings Preview

By Ethan Smith

Walt Disney Co. (DIS) is scheduled to announce its fiscal fourth quarter earnings after the market closes Thursday. Here's what you need to know:

EARNINGS FORECAST: Net income of 88 cents a share is the consensus of analysts surveyed by Thomson Reuters, compared with 77 cents reported a year earlier. The company doesn't provide earnings guidance.

REVENUE FORECAST: Analysts expect revenue of $12.37 billion, compared with $11.57 billion reported a year earlier.

WHAT TO WATCH:

--ESPN AFFILIATE FEES: Sports broadcaster ESPN provided a rare sour note in otherwise strong earnings for Disney last quarter due to issues including skyrocketing sports rights costs and modest subscriber losses. But the most surprising blow was growth of affiliate revenue -- the money paid by cable and satellite companies to carry the channel -- in the mid-single digit percentages, below the recent norm. Disney has said that should return to its typical high-single digit rate and investors are sure to be watching to make sure that is true.

--LIFE AFTER "FROZEN": Disney's film studio -- and, to a lesser extent, its consumer-products division -- has soared the past two quarters thanks to the blockbuster box office and DVD/digital sales of "Frozen." But now that the animated hit is out of theaters and has sold most of the copies that it will for viewing, the studio must come back to Earth. Which isn't to say the summer wasn't strong for Disney's studio, thanks to the hits "Maleficent" and "Guardians of the Galaxy" -- particularly compared with a summer 2013 dominated by flop "The Lone Ranger."

--SHANGHAI AND "STAR WARS": A lot of the value baked into Disney these days is based on huge expectations for upcoming "Star Wars" films (and all the consumer products that will come with them) and the company's first-ever theme park in mainland China. As the planned late 2015 launch date for both Shanghai Disneyland and "Star Wars: Episode VII" approaches, investors will be looking for more details about them.

Write to Ethan Smith at [e-mail]

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