On Friday, Deutsche Bank (ETR:DBKGn) adjusted its financial outlook for Walt Disney Co (NYSE:DIS), increasing the price target to $131 from $115, while maintaining a Buy rating on the entertainment giant's stock.
The revision follows Disney's recent guidance, which the bank's analyst noted as being more detailed than ever before, with projections for operating income (OI) at the segment level, along with forecasts for cash flow, capital expenditures, adjusted earnings per share (EPS), dividend growth, and share repurchases.
The analyst highlighted that the guidance for Disney's Experiences segment projects a 6-8% growth in operating income, surpassing their initial estimate of a 2% decline.
For the Sports segment, the fiscal 2025 guidance aligns with the bank's estimates on a pro forma basis, even after adjusting for the deconsolidation of operations in India, which impacts reported 2025 Sports OI by approximately $550 million.
The Entertainment segment's guidance suggests double-digit OI growth, which is about $100 million higher than the bank's estimate, again adjusted for the Indian market.
Capital expenditures are expected to be $8 billion, which is $1 billion more than the bank's previous estimate. This increase in capital expenditures results in free cash flow (FCF) guidance being $0.5 billion lower than expected. However, high single-digit adjusted EPS growth guidance is viewed positively compared to the bank's earlier forecast of a 1% decline.
Looking further ahead, Disney's management provided insights into fiscal years 2026 and 2027, including segment OI guidance, adjusted EPS, and cash flow from operations (CFO).
The guidance for these years suggests the continuation of robust growth rates across all three operating segments and calls for double-digit adjusted EPS growth in both years.
Notably, the 2026 guidance includes a target for a 10% OI margin for Entertainment Direct-to-Consumer (DTC), excluding Hulu Live. The analyst emphasizes that this target should be considered directional due to the non-disclosure of Hulu Live OI.
In other recent news, The Walt Disney Company (NYSE:DIS) has projected strong growth in its latest earnings call. CEO Bob Iger anticipates high single-digit adjusted EPS growth in fiscal 2025, with expectations of double-digit growth in 2026 and 2027.
Disney's content divisions have celebrated a record 60 Emmy Awards and box office hits like 'Inside Out 2' and 'Deadpool & Wolverine'. Disney+ has reached a milestone of 174 million subscribers, with plans to introduce an ESPN tile and personalized viewing experiences.
CFO Hugh Johnston expects a strong recovery in Disney's Experiences segment in 2025. Advertising growth is anticipated to be around 3% in 2024, improving further by 2025. The hiring of Adam Smith is set to enhance streaming technology and user engagement on Disney+.
Despite facing challenges in Q1 due to hurricanes and pre-launch costs impacting the Experiences segment, Disney remains optimistic about its strategic direction and its ability to deliver strong growth. These are recent developments in the company's performance and future outlook.
InvestingPro Insights
Recent InvestingPro data aligns with Deutsche Bank's optimistic outlook for Walt Disney Co. The company's market capitalization stands at $198.16 billion, reflecting its significant presence in the entertainment industry. Disney's revenue for the last twelve months reached $91.36 billion, with a 2.77% growth rate, indicating steady expansion. This growth is further emphasized by the 6.28% quarterly revenue increase in Q4 2024.
InvestingPro Tips suggest that net income is expected to grow this year, supporting Deutsche Bank's projection of high single-digit adjusted EPS growth. Additionally, the strong return over the last three months, with a 22.9% price total return, mirrors the positive sentiment expressed in the analyst's report.
It's worth noting that while Disney's P/E ratio (adjusted) stands at 26.83, its PEG ratio is a more favorable 0.36, potentially indicating undervaluation relative to its growth prospects. This aligns with Deutsche Bank's decision to raise the price target.
For investors seeking more comprehensive analysis, InvestingPro offers 8 additional tips for Disney, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.