Is Disney Stock a Buy After Strong Q2 Results Under New Leadership?

Holding its first earnings call under new CEO Josh D’Amaro, Disney DIS) was able to post favorable results for its fiscal second quarter yesterday, exceeding top and bottom line expectations and reaffirming its double-digit growth targets for fiscal 2026 and FY27. Reassuring investors, D’Amaro emphasized creative excellence, technology, and streaming as core pillars of Disney’s growth strategy.  While Disney stock has lost its mojo in years past, DIS is still widely held in institutional and retail portfolios due to its combination of blue-chip stability, index-fund ubiquity, and broad brand appeal, making it a natural long-term holding for both professional managers and individual investors.Institutions consistently hold more than 70% of Disney’s shares, which can help limit volatility despite a stagnant price performance in recent years.   Image Source: Zacks Investment Research Disney’s Favorable Q2 ResultsDisney’s Q1 sales expanded 6% year over year to $25.16 billion and edged estimates of $25.06 billion. Despite global macroeconomic pressures, domestic theme park demand remained stable with Disney’s Experiences segment revenue rising 7% to $9.49 billion. Entertainment revenue rose 10% to $11.72 billion, highlighted by a 13% spike in streaming revenue at $5.49 billion. More importantly, streaming income jumped 88% to $582 million, driven by price increases and margin improvements among Disney+ and Hulu. Notably, this marked the first double-digit operating margin (10.6%) for Disney’s streaming business.Overall, Q2 net income came in at $2.25 billion. This translated into adjusted earnings of $1.57 per share, which was up 8% YoY and topped EPS expectations of $1.49 by 5%.Image Source: Zacks Investment Research Disney Reaffirms Its EPS GuidanceAlthough Disney is still cautious about macroeconomic risks (fuel costs, geopolitical tensions, park demand shifts), the company remains confident in its multi-year growth plan, reaffirming its EPS guidance of 12% growth in FY26 and expecting double-digit earnings growth next year as well.The Zacks Consensus currently calls for Disney’s annual earnings to increase over 11% this year to $6.61 per share, with FY27 EPS projected to rise another 9% to $7.24.  Image Source: Zacks Investment Research Disney’s Respectable Dividend & Attractive ValuationWhat has also kept investors engaged regarding Disney’s return to growth is the reinstatement of its dividend in 2023 after previously suspending it during the COVID-19 pandemic. Paying its dividend semi-annually, Disney most recently increased its dividend by 50% last July with a current yield of 1.39%.Furthermore, if Disney’s operational efficiency continues to improve, there is plenty of room for more dividend hikes in the future, considering its payout ratio is at 26%.Image Source: Zacks Investment Research At the moment, Disney’s dividend yield tops the S&P 500’s average of 1.01%, and its price to forward earnings (P/E) valuation of 16.3X offers a nice discount to the broader market’s 23.1X. DIS is also trading just beneath the often preferred price to forward sales ratio (P/S) of less than 2X, with the S&P 500 at nearly 5X.It’s also noteworthy that Disney stock is trading at discounts to its decade-long forward P/E and P/S medians of 20.7X and 2.6X, respectively.Image Source: Zacks Investment Research Conclusion & TakeawayDisney’s Q2 results were decisively strong, driven by streaming momentum, resilient theme park performance, and a clear strategic direction under new leadership. The media conglomerate's outlook isn’t overwhelmingly strong, but Disney remains focused on execution rather than overpromising.For now, Disney stock lands a Zacks Rank #3 (Hold) and is showing signs of re-establishing itself as a durable long-term holding for both institutional and retail investors.Beyond Nvidia: AI's Second Wave Is HereThe AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.See Stocks Now >>This article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks