For Disney, ESPN's next play not so easy

Disney CEO Bob Iger may give more insight Wednesday on what he's thinking for the media giant's lucrative television properties, specifically ESPN, after hinting they may not be "core to Disney" earlier this year. 

"While we are open to considering a variety of strategic options for our linear businesses, at this time The Walt Disney Company has made no decision with respect to the divestiture of ABC or any other property and any report to that effect is unfounded," the company said in a September statement. This came after Iger's original comments during an interview with CNBC in July.

Regarding sports giant ESPN, Bank of America analyst Jessica Reif Cohen weighed in, ahead of Disney's quarterly results. 

"ESPN standalone financials show a company fighting to stay in its place, given a backdrop of declining linear subs and higher sports costs," said Reif Cohen in a recent research note. "While we believe a potential transaction would be positive for DIS, and ESPN remains a premiere sports asset, the benefit to prospective buyers appears nebulous," she noted. 

A potential, minority strategic investor could be in the cards for ESPN, which has an estimated enterprise value of $24 billion, per Reif Cohen. 

"If DIS intends to retain a 51% majority stake, given Hearst's current 20% stake, this implies an ESPN sale of up to a ~36% equity stake across a single or several different buyers (diluting Hearst's stake down to ~13%). We note this represents one potential structure out of several possible combinations," she outlined. 

Through the end of fiscal 2022, ESPN earned $16 billion in revenue and $2.9 billion in profits, according to an October SEC filing that provided a deeper look at the company's financials.

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The field is wide open for potential partners, according to Reif Cohen.

"In our view, these buyers could be comprised of three different groups including: 1) the major sports leagues (e.g. NBA/NFL), 2) technology partners (e.g. Amazon/Apple/Google) and 3) distribution partners (e.g. Comcast/Verizon)," she detailed.

Inquiries to Disney were not immediately returned. 

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Disney is expected to report a sharp jump in profits with earnings of $0.70 per share vs. $0.30 during the same period a year ago. Revenue is expected to rise 6% to $21.35, according to Refinitiv estimates. 

Investors will be listening to Iger for updates not only on ESPN and other TV properties, but also on theme park attendance and its film business, including Marvel and Hulu. Disney recently confirmed it will buy the remaining stake in Hulu from Comcast in a deal worth about $8 billion.

Additionally, activist Nelson Peltz is reportedly seeking more board seats at Disney, according to The Wall Street Journal. 

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Disney shares have slipped 3% this year, compared to the S&P 500's 14% rise. 

Disney announced Monday that it hired PepsiCo executive Hugh Johnston to replace Christine McCarthy as chief financial officer. McCarthy stepped down earlier this year. Johnston will take over on Dec. 4.