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What’s Driving Disney’s Fiscal 1Q18 Revenue?

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Fiscal 1Q18 estimates

The Walt Disney Company (DIS) is set to release its fiscal 1Q18 results on February 6, 2018, after the closing bell. According to Yahoo Finance (VZ), the company is expected to see $15.5 billion in revenue, with annual growth of 4.6%. For fiscal 2018, the top-line estimate is $55.1 billion, with YoY (year-over-year) growth of 6.2%. In 4Q17, the company generated $12.8 billion in revenue, down 2.7% YoY due to lower Media Networks and Studio Entertainment revenue.

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Revenue drivers in fiscal 1Q18

The graph above shows Disney’s revenue growth over the last five quarters, during which the company’s top line has fallen at a compound annual rate of 0.1%. In 4Q17, the company’s Studio Entertainment segment reported a ~21% YoY drop in revenue due to a lack of popular movie releases. However, things may change in 1Q18 with the release of hit movies such as Thor: Ragnarok from Marvel and Star Wars: The Last Jedi. Combined, the films garnered more than $2 billion at the worldwide box office.

Moreover, such successful movies may cast a halo effect on its Consumer Products segment, driving merchandise products. The company is planning to open a Star Wars area at Disneyland in 2019, which may also contribute to its Parks and Resorts revenue.

According to The Numbers, in 2017, Disney dominated the domestic box office with a 21.8% market share, followed by Warner Bros. (TWX), Universal (CMCSA), and 20th Century Fox (FOXA) with shares of 18.5%, 13.8%, and 12%, respectively.

In 1Q18, the company’s Media Networks unit may show improvement, driven by higher rates and stronger content and offset by rising programming costs. In 4Q17, the segment witnessed a 3.4% YoY decline due to lower program sales, ESPN viewership, and advertising revenue.

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