Earnings Breakdowns $DIS, $PCLN and More

Earnings Breakdowns $DIS, $PCLN and More

PRICELINE

Overview

Priceline Group, Inc. (PCLN) is slated to report 3Q 2016 earnings after the bell on Monday, November 7^th. The earnings release is expected at approximately 4:00 p.m. ET followed at 4:30 p.m. with a webcast presentation available through Priceline Investor Relations. The company is one of the top two global online hotel reservation services and could therefore influence direction of the index futures and other broad market gauges.

Outliers & Strategy

Key measures:

• Non-GAAP Earnings Per Share (EPS): Company guidance is a range of $28.30 to $29.80. The current Street estimate is $29.51 (range $27.48 to $31.80). (Source: Yahoo! Finance) Consensus was $28.97 three months ago.

• Revenues: Company guidance is 12% to 17% y/y growth. Analysts expect an increase of 16.6% y/y to $3.62 bln. Consensus was $3.57 bln three months ago.

• Gross Travel Bookings: Company guidance is 11% to 18% y/y growth or a range $16.847 bln to $17.586 bln, so the midpoint is $17.216 bln.

• Adjusted Earnings Per Share (EPS) Guidance for 4Q2016: The current Street estimate is $13.86 (range $12.14 to $16.62).

• Revenues Guidance for 4Q2016: Analysts expect an increase of 15.2% y/y to $2.30 bln (range $2.24 bln to $2.40 bln).

• Priceline’s P/E of 28.2 compares to a 5-year average of 30.5; P/B 7.9 compares to a 5-year average of 9.7; P/S 7.6 compares to a 5-year average of 7.6; P/CF 21.3 compares to a 5-year average of 24.1.

• Analysts view Priceline with 21 (12 two qtrs. ago) Buy, 5 Hold, and 0 Sell ratings. (source: MarketBeat.com)

• Insiders sold 8,964 shares over the last three months and a net 3,878 shares in the past year. (source: NASDAQ.com) In February 2015, the company approved a $3 billion buyback after a $1 bln convertible debt sale in 2014. 2013 had a $1.3 billion buyback.

• Priceline and Expedia (EXPE) are the top two global online travel agents with similar gross-hotel bookings (US$30bn), and results could also impact other online travel agents, such as Travelzoo (TZOO) and TripAdvisor (TRIP). The growth of Expedia and Priceline are threatening to make the smaller outlets irrelevant to the industry, according to some analysts.

• Priceline has a 1-day average price change on earnings of 7.30%. Options are pricing in an implied move of 6.18% off earnings.

Recent News

• 10/28: The Priceline Group’s six-month search for a permanent CEO could be drawing to a close with the winnowing of internal and external candidates, according to a post on Skift.com.

• 10/27: Expedia reported earnings and billings that fell short of analysts’ estimates, according to a post on TheStreet.com.

• 10/22: Priceline’s Kayak is quietly testing a prominent search function for short-term apartment-and-home rentals where Airbnb has been the leader, according to a post on Quartz.com.

• 10/17: Priceline CEO Jeffery Boyd said the diversification allowed Priceline to withstand the immediate drop off in European travel after terror attacks in Paris and Brussels, according to a post on TheStreet.com.

• 10/07: RBC Capital Markets raised their price target on Priceline to $1,750 citing that Bookings.com is starting to gain traction in the U.S. and that Priceline is the second choice for room-sharing service after AirBnB, according to a post on TheStreet.com.

Technical Review

Priceline’s previous all-time high on November 5, 2015 was $1476.52 and the stock has pushed above that with the $1501.79 on October 15, 2016. Possibly some seasonality is involved with these Q4 highs, so there’s a worry of lows having been made in Q1 of the past two years. Point and figure technicians have a bearish price objective of $1351. (Chart courtesy of StockCharts.com)

Summary

Priceline’s CEO search is nearing completion with three really strong internal candidates suggesting an easy transition. Exposure to Europe remains a worry but analysts have increased their bullishness the past two quarters. Insider buying dried up after two quarters. The company has beaten estimates by an average of $1.02 the last four quarters. Estimize consensus for a Non-GAAP EPS of $29.67 on revenue of $3.611 bln compares to analyst consensus of $29.51 on revenue of $3.62 bln. Gross bookings at around the high side of guidance of $17.586 bln would be of interest. Traders would then focus on 4Q guidance.

 

DISNEY

Overview

Walt Disney Co. (DIS) is slated to report 4Q 2016 earnings after the bell on Thursday, November 10^th. The earnings release is expected at approximately 4:15 p.m. ET followed at 5:00 p.m. with a webcast presentation available through Disney Investor Relations. Disney’s Media Networks includes sports channel ESPN and ABC. Parks and Resorts include Walt Disney World Resort in Florida and the Disneyland Resort in California, as well as the Disney Cruise Line. Films are distributed under the Walt Disney Pictures, Pixar, Marvel, Touchstone and Lucasfilm banners. Disney’s Consumer Products segment publishes and sells products based on the company’s intellectual property — licensing characters from its films, TV shows and other creations to third parties. The media and entertainment giant is a member of the Dow Jones Industrial Average (DIA) and could therefore influence direction of the index futures and other broad market gauges.

Outliers & Strategy

Key measures:

• Earnings Per Share (EPS) Excluding Items: The Street estimate is $1.16 (range $1.11 to $1.32). (Source: Yahoo! Finance) Consensus was $1.22 three months ago.

• Revenues: Analysts expect an increase of 0.40% y/y to $13.56 bln (range $13.09 bln to $14.17 bln).

• Price/Earnings of 16.6 compares to a 5-year average of 19.3; Price/Book 3.4 compares to a 5-year average of 2.8; Price/Sales 2.7 compares to a 5-year average of 2.7, Price/Cash Flow of 12.1 compares to a 5-year average of 15.9. Dividend yield of 1.5% compares to a 5-year average of 1.4%.

• Analysts remain bullish on Disney with 14 (19 two qtrs. ago) Buy, 15 Hold, and 2 Sell ratings. (source: MarketBeat.com)

• Insider bought a net 1,060 shares the last three months but sold a net 274,794 shares in the past year. (source: NASDAQ.com) Disney increased annual stock buybacks to $6-8 bln beginning in 2014. (2012 was $3 bln.) The company intends to buy back $6–$8 billion of its stock during fiscal 2016.

• Disney is compared to other entertainment companies with quarterly results possibly impacting Viacom (VIA) and Time Warner (TWX).

• Disney shares have a 1-day average price change on earnings of 3.82%. Options are pricing in an implied move of 3.98% off earnings.

Recent News

• 10/30: With the NFL season almost halfway over, ratings are down 10% to 15% so far this year. ESPN is still Disney’s biggest cash cow, according to a post on Fool.com.

• 10/27: Credit Suisse cut estimates on Walt Disney and still thinks the company could consider taking over Twitter (TWTR) or Netflix (NFLX) for consumer distribution capabilities needed to bid on sports for ESPN if the AT&T/Time Warner merger goes through, according to a post on Barron’s.com.

• 10/19: Stifel Nicolaus sees Disney reporting below Q4 consensus on the belief that ESPN is at least 3-4mn subscribers lower than expectations and 2017 faces difficult comparisons with Rogue One not having the same operating contribution as Star Wars, according to a post on Barron’s.com.

• 10/14: Disney and Dole Food are partnering to launch a line of co-branded fresh produce this fall featuring Disney characters, according to a post on TheStreet.com.

• 09/30: Rumors of a potential Netflix (NFLX) acquisition by Disney were making the rounds, according to a post on Barron’s.com.

• 09/28: Citigroup and Nomura offered various reasons why Disney should not buy Twitter, according to a post on Barron’s.com.

Technical Review

Disney’s stock had risen for four years without a correction to the August 4, 2015 all-time high at $122.08 and then fell 20% before the month was finished. After retesting the high in November 2015, the worry is a double-top formation. Point and figure technicians have a bearish price objective of $88 and their uptrend line is $87. (Chart courtesy of StockCharts.com)

Summary

Analysts worry that Walt Disney’s ESPN could struggle as people continue to shift away from cable subscriptions. This year’s drop in NFL viewership wasn’t expected. Insider selling dried up nine months ago and the past two quarters have seen a small amount of purchases. Increased buybacks have given support on pullbacks, so a new buyback announcement would be comforting.  A history of unusually high valuations of revenue for Disney’s stock have preceded major turning points for the stock and the economy over the past 35 years, so 2015’s price/sales of roughly 4x could still be followed by further discounting . The company beat/missed earnings expectations by an average of 4c for three of the past four quarters and the other quarter was an 18c beat when Star Wars was released. Estimize consensus for an EPS excluding items of $1.20 on revenue of $13.593 bln compares to analyst consensus of $1.16 on revenue of $13.56 bln.