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Disney ETFs in Focus Ahead of Q2 Earnings

Global media and entertainment company, The Walt Disney Company DIS is set to release second-quarter fiscal 2019 results on May 8, after market close. The company has gained nearly 26.5% in the past three months. The momentum is expected to be maintained as the company is working hard on shaping 2019 as a transformative year by completing the 21st Century Fox acquisition and Disney+ streaming service launch.

Inside Our Methodology

Disney has a Zacks Rank #4 (Sell) and an Earnings ESP of +1.45%. According to our surprise prediction methodology, the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) stock with a positive Earnings ESP increases the odds of an earnings beat. Meanwhile, a Zacks Rank #4 or 5 (Strong Sell) stock is best avoided going into the earnings announcement, especially when the company is seeing negative estimate revisions. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Disney’s earnings estimates were revised downward over the past 30 days for the soon-to-be-reported quarter. It is expected to see an earnings decline of 14.1% year over year but revenues are likely to increase 0.2%. Disney’s earnings surprise history is robust with the company delivering positive earnings surprise of 8.7% on average with earnings beats in three of the last four quarters. The stock belongs to a bottom-ranked Zacks Industry (bottom 21%) and has a Growth Score of B.

What to Watch?

Disney has been hogging the limelight with the release of Marvel Studios' new action movie — Avengers: Endgame. This is especially true as the movie broke box-office records hitting the billion-dollar mark in just five days (read: Avengers Endgame Smashes Box Office Records: Buy Disney ETFs).

Also, the company is progressing steadily with the acquisition of Fox’s major assets for $71 billion. The company is expected to gain from extending its demand-based pricing strategy to multi-day tickets for better managing customer attendance within the Parks & Resorts business. The move is expected to distribute demand throughout the year to prevent fluctuations in revenues and enhance services by reducing wait time. In turn, these changes are expected to result in attendance growth and improved per capita spending.

However, persistent streaming technology service losses may hurt the second-quarter top line.

ETFs in Focus

Given this, ETFs with the highest allocation to the social media giant will be in focus going into its earnings announcement. These funds are potential movers if Disney comes up with a positive earnings surprise. While there are several ETFs in the space with DIS in their basket, we have highlighted funds that have high exposure to this global media and entertainment company (see: all the Consumer Discretionary ETFs here):

Invesco Dynamic Leisure and Entertainment ETF PEJ

This fund offers exposure to 29 US leisure and entertainment companies by tracking the Dynamic Leisure and Entertainment Intellidex Index. The Walt Disney is the top firm, making up for 8.49% allocation. The ETF has amassed $67.3 million in its asset base and charges 63 bps in annual fees. The fund has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

Multifactor Media and Communications ETF JHCS

This ETF follows the John Hancock Dimensional Media and Communications Index, which targets a wide range of U.S. media and communication stocks to exploit the sector's opportunities. It holds 65 stocks in its basket with DIS taking the top spot at 8.26% share. JHCS has AUM of $4.0 million and charges 40 bps in annual fees.

PowerShares Dynamic Media Portfolio PBS

PBS seeks to offer capital appreciation by investing in companies that are selected on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value by tracking the Dynamic Media Intellidex Index. This approach results in a basket of 30 stocks, with Disney occupying the top spot at 7.96%. The product has AUM of $85.2 million and an expense ratio of 0.63%. The fund has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Basket These 5 ETFs to Tap March Madness).

iShares Evolved U.S. Media and Entertainment ETF IEME

This actively managed ETF employs data science techniques to identify companies with exposure to the media and entertainment sector. Holding 85 stocks in its basket, Disney occupies the top position in the basket with 7.9% share. The fund has accumulated $5.6 million in its asset base and charges 18 bps in annual fees (read: Netflix Beats, Guides Lower: ETFs in Focus).

Vanguard Communication Services ETF VOX

This fund targets the communication sector by tracking the MSCI US Investable Market Communication Services 25/50 Index. Holding 107 stocks in its basket, Disney takes the fourth spot with 5.8% share. VOX has AUM of $2 billion and charges 10 bps in annual fees. The fund has a Zacks ETF Rank #1 with a Medium risk outlook (read: ETFs to Soar After Facebook's Solid Q1 Results).

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The Walt Disney Company (DIS): Free Stock Analysis Report
 
Invesco Dynamic Leisure and Entertainment ETF (PEJ): ETF Research Reports
 
Vanguard Communication Services ETF (VOX): ETF Research Reports
 
Invesco Dynamic Media ETF (PBS): ETF Research Reports
 
iShares Evolved U.S. Media and Entertainment ETF (IEME): ETF Research Reports
 
JH-M-F MDA&COMM (JHCS): ETF Research Reports
 
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