Upside from Force Awakens Plus Coming Sequel Could Mean 35% EPS Upside for Disney (DIS) - FBR

FBR Capital analyst, Barton Crockett, sees 35% EPS upside for Disney (NYSE: DIS) as "Star Wars: Force Awakens" appears to be tracking to $1 billion in box office receipts. What may not be considered in expectations is the coming sequel, one year from now: "Rogue One", due in December 2016. As Force Awakens beats expectations, projections for Rogue One are likely to increase as well, creating a compounding effect for EPS growth.

The analyst's base assumption remains that Force Awakens has $730M domestic box office, ranking just behind Avatar's all-time record of $761M. However, current tracking argues for a December 18 opening weekend at the $200M level (assumes $185M), 2.5x Avatar's $77M on a comparable weekend in 2009 and similarly above the December record $85M opening for The Hobbit: An Unexpected Journey in 2012.

If international box is 2.5x domestic (on par with averages for large global tent poles), Force Awakens could make total profits of $2.7B, versus our current estimates of under $2B.

In FY16, Disney's fees from licensed merchandise rise $90M, to $2.05B, with a $300M lift from Force Awakens offsetting declines in Frozen and classic Star Wars. But, with an unprecedented Force Friday promotion after Labor Day, industry-high fee splits, ample shelf space for Christmas, and broad category presence, an upside case of $700M of fees on $5B of merchandise sales looks possible.

No change to the $126 PT or Outperform rating.

For an analyst ratings summary and ratings history on Walt Disney click here. For more ratings news on Walt Disney click here.

Shares of Walt Disney closed at $113.47 yesterday.

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