DIS – Market expectations are for record Uniform ROA, but management’s concerns about ESPN, as well as Parks and Resorts operating margins, imply this may be unwarranted

• The Walt Disney Company (DIS:USA) currently trades near historical averages relative to UAFRS-based (Uniform) Earnings, with a 16.9x Uniform P/E. At these levels, the market has fairly bullish expectations for the firm, which, given management’s concerns about cash flow from operations and the automotive cycle, may be unwarranted
• Specifically, management appears concerned about the sustainability of cash flow from operations growth, and the potential for a disruptive correction in the automotive market. They also may be downplaying concerns about the sustainability of the current automotive cycle. Should Uniform ROA fail to expand to new highs, as management sentiment suggests, equity downside would be warranted