Walt DisneyWalt Disney Co (All Sessions) is set to report year-on-year (YoY) growth in its third quarter (Q3) earnings release on Wednesday, likely focusing on the growth of its subscription service Disney+ and the outperformance of its amusement parks.

But will management have to lead with caution in their guidance as consumers are likely to have started to feel the pinch of higher costs of living, reducing their spending on discretionary items like amusement parks?

(Video Transcript)

Walt Disney Q3 earnings: what to expect

Walt Disney will be reporting its third quarter earnings on Wednesday, and analysts are expecting the entertainment company to produce earnings of just under $1 per share on revenues of almost $21 billion.

This would, in fact, be higher than the third quarter of 2021. But the streaming service's Disney + is definitely going to be attracting a lot of attention from investors, especially as their second quarter (Q2) numbers beat expectations in terms of new subscribers and setting a path to Netflix Inc (All Sessions), who saw a little bit more of a gloomy outlook in the same quarter.

Disney chart

Let's pull up a chart of Disney to see how their shares are performing, because we have seen consumers prioritising entertainment after being deprived of this for almost two years because of the pandemic.

But there's definitely something to keep an eye out for in the future, and that's, of course, the increase of the cost of living. That might mean that people are spending less on discretionary items and their disposable income would be reduced, which means potentially their amusement park visits will also be reduced in the next few months.

That's definitely where we might see a little bit of a guidance there from the management at Disney. So, watch out for that guidance.

But for now, we are seeing a little bit of an uptick in Disney shares. Again, a lot of this having to do with the performance of Disney plus outperforming expectations in terms of analysts.

So focus on these three things for the earnings: watch out for Disney + and its subscription numbers, watch out for the park entrances for the session, but also watch out for those announcements from Disney management as to what they're expecting in the next few months as people start to feel the pinch of these higher costs of living.

Daniela Sabin Hathorn | Presenter and Analyst, London
08 August 2022