Walt Disney (DIS) Remains a "Show-Me Story" Ahead of Earnings

Our preview of the upcoming week's earnings reports includes Walt Disney (DIS), Coca-Cola (KO) and Peloton Interactive (PTON).

Someone holding a phone showing the Disney+ app
(Image credit: Getty Images)

It's another busy week for the earnings calendar, with entertainment and media giant Walt Disney (DIS (opens in new tab), $140.39) among several Dow Jones stocks set to report. DIS is scheduled to unveil its fiscal first-quarter earnings report after Wednesday's close.

Analysts appear to be all over the place on the subject, with estimates ranging from 40 cents per share on the low end to $1.13 per share on the high end. The consensus estimate, meanwhile, is 61 cents per share (+90.6% YoY). Revenue is expected to arrive at $18.74 billion, a 15.3% increase from its year-ago results.

"DIS remains well positioned for the recovery driven by a continued increase in capacity at theme parks and an improving content slate in the second half of fiscal 2022," writes BofA Securities analyst Jessica Reif Ehrlich (Buy).

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She points to Disney+ as "a key tenet of the bull thesis," and expects the company to report 7 million net adds in its fiscal first quarter (-67% YoY). Still, total streaming subscribers are forecast to land at 125.1 million, up 31.8% from the year prior.

The analyst also anticipates Disney theme park attendance will show "signs of improvement" over the three-month period.

But following a disappointing fiscal fourth quarter where the firm missed both top- and bottom-line estimates, DIS remains a "'show-me story' as investors await signs of Disney+ net adds to re-accelerate and theme parks to show operating leverage as attendance improves," Reif Ehrlich says.

Coca-Cola Stock Outperforms Before Q4 Earnings

Coca-Cola (KO (opens in new tab), $61.21) stock has put in a strong outperformance against the Dow Jones Industrial Average and S&P 500 so far in 2022. KO shares are up about 4% for the year-to-date, compared to negative returns of 4% and 6%, respectively, for the indexes.

Can a solid earnings report help keep the wind at KO's back?

The drinkmaker is scheduled to report fourth-quarter earnings ahead of the Feb. 10 open. Analysts, on average, are targeting revenues of $8.96 billion (+4.1% YoY) and earnings of 41 cents per share (-12.8% YoY) – the latter of which is due in part to Q4 2021 having six fewer days than the previous year.

In fact, analyst optimism toward KO seems to be growing for the long term. "With the pandemic's worst likely passed, we think Coke is now poised for a period of mid-single, maybe even double-digit topline growth and high-single digit bottom line growth," says Credit Suisse analyst Kaumil Gajrawala, who has an Outperform (Buy) rating on the stock, and calls it a top pick.

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"We expect Coke to be a stronger company as the pandemic fades," Argus Research analyst Chris Graja says. "We expect the combination of more focused marketing and a more profitable brand portfolio to boost earnings and the share price as the away-from-home business rebounds." Graja has a Buy rating on Coca-Cola, and adds that high-quality stocks such as this one play an important role in portfolio construction.

That sentiment is certainly shared by the Oracle of Omaha. Not only has the stock been a member of the Berkshire Hathaway portfolio for more than three decades, but the holding company is Coca-Cola's largest shareholder with a 9.3% stake.

Analysts Eye Earnings Call Guidance on Pummeled Peloton

To say Peloton Interactive (PTON (opens in new tab), $23.97) has had a rough few months would be an understatement. Shares of the at-home exercise equipment maker, which shot to prominence during the start of the pandemic as gyms shut down, have shed roughly three-quarters of their value since late October amid a slew of fundamental follies.

These include an early November fiscal first-quarter miss and late-January press reports that the company is temporarily suspending production of its fitness equipment amid a big drop in demand – the latter of which was later denied by Peloton CEO John Foley.

Will PTON's fiscal second-quarter earnings report – due out after the Feb. 8 close – add to the stock's woes or help it reverse course?

Following those reports of production cuts, PTON issued preliminary numbers for its fiscal Q2 in late January, saying it expects revenue to arrive at $1.14 billion versus previous guidance of $1.1 billion to $1.2 billion. The company also anticipates it ended the quarter with 2.77 million subscribers, lower than its prior guidance of 2.8 million to 2.85 million.

Peloton's fiscal Q2 revenue outlook – which is in line with analysts' consensus estimate – represents a 7.5% year-over-year (YoY) decline. Wall Street pros, on average, also expect PTON to swing to a per-share loss of $1.19 for the three-month period, compared to its 18 cents per-share profit from the year-ago period.

But due to the company's preliminary release of its fiscal Q2 results, Truist Securities analyst Youssef Squali will be looking toward the company's earnings call for further guidance.

"We're maintaining a Hold rating and recommending that investors remain on the sidelines until we get better visibility into the company's evolving strategy in light of lower than anticipated demand," he says. "We view the long-term secular trends around home fitness as favorable still, and PTON's brand, global scale and internal sourcing are strong attributes for success."

Squali adds that, in the short term, management should be focused on a strategy of growth and "around rightsizing the operations to address near-term headwind realities."

Oppenheimer analyst Jason Helfstein, meanwhile, recently slashed his price target on PTON to $40 from $85 following the fiscal second-quarter pre-announcement. "However, we are maintaining our Outperform as we believe PTON will sustain its leadership position in connected fitness over the long term," he writes in a note.

Karee Venema
Contributing Editor, Kiplinger.com

With over a decade of experience writing about the stock market, Karee Venema is an investing editor and options expert at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at Schaeffer's Investment Research. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.