DJ Disney Reports Earnings This Week. Here's What to Expect. -- Barrons.com
By Nicholas Jasinski
Disney+ aside, the Covid-19 pandemic has been little short of a perfect storm for Walt Disney. It has had to contend with disrupted production schedules, delayed film releases, shut down theme parks and cruises, and clients' slashed advertising budgets. Its direct-to-consumer streaming unit is made for the social-distancing environment, but is a tiny minority of Disney's revenues -- and isn't profitable yet.
Disney (ticker: DIS) is set to report its fiscal third-quarter results -- which correspond to the calendar second quarter -- on Wednesday after the market closes. Those results might not matter all that much to investors. Wall Street already knows the numbers will be ugly -- what matters more is the outlook for a recovery. Comments from Disney management on the trends they're seeing as economic activity resumes will be closely parsed. With the return of sports and gradual reopening of Disney's theme parks already underway, investors will want to hear what comes next for the media and entertainment giant.
Analysts expect Disney to report an adjusted loss of 61 cents per share in the latest quarter, which would be down from a 60 cent profit in the first quarter -- Disney's fiscal second -- when the Covid-19 impact began to be felt. It also compares to $1.35 in adjusted earnings per share in the year-earlier period. Wall Street expects that Disney's fiscal third-quarter revenues dropped 39% year over year, to $12.4 billion, and that adjusted earnings before interest, taxes, depreciation, and amortization, or Ebitda, fell to a $50 million loss from a $4.6 billion profit last year.
Disney stock has felt the pressure in 2020, but it's well off its late-March lows for the year. The stock has dropped 19% this year through Friday's close, and management suspended Disney's dividend earlier this year. That compares with a 2% return after dividends for the S&P 500 and a 7% loss for the Dow Jones Industrial Average. Other traditional media stocks have tumbled even more than Disney this year. ViacomCBS (VIAC) and Discovery (DISCA) stocks are each down 36%, AMC Networks (AMCX) has lost 42%, and Fox (FOXA) is off 30%. Streaming-focused Netflix (NFLX), meanwhile, has seen its stock soar 51% since the start of the year.
Here's a snapshot of Wall Street's expectations and some recent history.
-- Disney's fiscal second-quarter result showed a company taking pressure from all sides, with the coronavirus pandemic and associated physical-distancing measures making it nearly impossible for the company to continue operating several of its core businesses. 2020 was also a planned investment year for its splashy new streaming initiatives, and the result was a 93% drop in reported earnings.
-- Adjusted for one-time factors and other impacts, Disney reported earnings of 60 cents per share in the prior quarter reported on May 5 -- well below analysts' 93-cent forecast. Sales in the period were $18 billion, about equal to what analysts had expected. Adjusted Ebitda fell to $3.6 billion from $4.3 billion a year earlier. Shares slipped 0.2% the following day.
-- A bright spot in Disney's portfolio has been Disney+, which makes up one leg of the company's streaming strategy alongside ESPN+ and Hulu. Streaming services across the industry have benefited from TV- and movie-watchers being stuck at home during the Covid-19 pandemic. The company said that Disney+ reached 50 million paid subscribers world-wide in April, just five months after launching.
-- Wall Street analysts lean bullish on Disney stock: 50% have a Buy or equivalent rating, while 46% recommend a Hold. One analyst rates Disney at Sell. Their average target price is $123.52, about 6% above the stock's recent level of $116.94.
-- Bob Chapek took over the CEO role from Bob Iger earlier this year. Iger has remained involved at Disney as executive chairman. Management will host a call with analysts at 4:30 p.m. ET on Thursday.
Write to Nicholas Jasinski at nicholas.jasinski@barrons.com
(END) Dow Jones Newswires
August 03, 2020 07:14 ET (11:14 GMT)
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