Disney earnings preview: Disney likely swung to a Q3 loss as theme park closures outweighed Disney+ growth
DIS) is set to deliver its fiscal third-quarter report after market close on Tuesday. The results are expected to be ugly, after the coronavirus pandemic hit the company in its most lucrative theme parks, media networks and studio film businesses.
“Earnings are expected to be awful, with virtually every part of Disney severely impacted by the COVID-19 pandemic except for Disney+/Hulu, which have been notable beneficiaries,” LightShed Partners analysts led by Richard Greenfield wrote in a note Tuesday morning. “What will be far more important to investors is how management discusses their plans to deal with the unprecedented challenges facing Disney over the coming year(s).”
Here are the main metrics expected of the report, compared to consensus estimates compiled by Bloomberg:
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Revenue: $12.39 billion, vs. $20.35 billion Y/Y
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Adjusted loss per share: 63 cents, vs. earnings of $1.35 per share Y/Y
Disney’s parks, experiences and products segment is expected to show the most pronounced impact from the pandemic. During the three months ending in late June, Disney grappled with severely reduced levels of theme park attendance, with many of its global locations closed for much of the quarter. Disney’s cruises were also halted.
nearly half of 2019’s annual operating profit. That dynamic, however, already began to unravel in the fiscal second quarter, when even the very early impacts of the pandemic and park closures drove a 58% reduction in operating profit in the theme parks segment for the company. Disney’s company-wide profit in the second quarter was down more than 90% over last year.” data-reactid=”27″>Before the pandemic struck, Disney’s parks, experiences and products segment comprised nearly half of 2019’s annual operating profit. That dynamic, however, already began to unravel in the fiscal second quarter, when even the very early impacts of the pandemic and park closures drove a 58% reduction in operating profit in the theme parks segment for the company. Disney’s company-wide profit in the second quarter was down more than 90% over last year.
Christine McCarthy said in May that the impact from Covid-19 could amount to as much as a $1.4 billion hit to operating income in the third quarter, with the majority of that blow dealt to parks.” data-reactid=”28″>Disney Chief Financial Officer Christine McCarthy said in May that the impact from Covid-19 could amount to as much as a $1.4 billion hit to operating income in the third quarter, with the majority of that blow dealt to parks.
Partway through its fiscal third quarter, Disney reopened both its Shanghai and Hong Kong theme parks, with some restrictions on attendance. In July – after the end of the third quarter – its Hong Kong theme park was temporarily shut again due to a spike in coronavirus cases in the region.
Florida Disney World, Paris Disneyland and Tokyo Disneyland locations in July, albeit with modified capacity. Disneyland Park in Anaheim, California, remains closed indefinitely, after shutting in mid-March for only the fourth time in company history.” data-reactid=”30″>The company also reopened its Florida Disney World, Paris Disneyland and Tokyo Disneyland locations in July, albeit with modified capacity. Disneyland Park in Anaheim, California, remains closed indefinitely, after shutting in mid-March for only the fourth time in company history.
Meanwhile, a drought of live sporting events likely drove a decline in advertising revenue in Disney’s ESPN business, weighing on its media networks segment as a whole. Bloomberg Intelligence analyst Geetha Ranganathan said she expected a 60%-plus drop in quarterly ad revenue in the media networks segment, which also includes ABC Television Network and broadcasting.
“Mulan” for a fourth time since March, leaving the release date as “unset” with the pandemic still under way. The debuts of its forthcoming “Star Wars” and “Avatar” films were also delayed by a full year.
A spate of stay-in-place orders across the country between mid-March and June also prevented Disney and other film studios from shooting new content during the quarter. That’s expected to impact release schedules down the line as well, though post-production that had already been under way did continue during the quarter.
The one bright spot in Disney’s report is expected to be in its streaming business, which includes both Disney+ and ESPN+. Each service grew subscribers during the prior quarter, as consumers increasingly turned to content streaming while sheltering in place. However, the unit as a whole was money-losing for Disney during the second quarter, with costs associated with ramping the nascent services still anchoring profitability.
