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Disney (DIS) 3rd Quarter Earnings: What to Expect

Walt Disney sign over entrance to corporate HQ
Credit: Fred Prouser / Reuters - stock.adobe.com

Media conglomerate Disney (DIS) is set to report third quarter fiscal 2020 earnings results after Tuesday’s closing bell. From its theme parks to studios, every aspect of Disney's business has been under severe pressure due to the coronavirus pandemic.

Coronavirus lockdowns have shuttered movie theaters across the country, disrupting Disney’s movie release schedules. After reaching all-time highs in November at $153.41, Disney shares have cratered, falling as much as 44%. While the stock has rallied about 8% over the past three months, the shares are still off 19% year to date and 18% over the past year. But things have begun to improve, albeit modestly.

The company on July 12th reopened Disney World to the public. Yet, since then COVID cases have consistently risen throughout the U.S. to record levels. The market, meanwhile, has had limited data regarding Disney’s various theme parks, namely ticket sales and customer traffic. The company’s resorts, hotels, theme parks and cruise ships makes up Disney’s largest business segment, generating some $26 billion in revenue last year, or 32.5% of its consolidated total. The market is also somewhat upbeat about the company’s Disney+ streaming business, which now has more than 50 million subscribers.

While Disney+ subscriptions should continue to rise, particularly as people are staying home longer, investors will decide whether the streaming business can make up for any perceived disappointment in Disney’s other lagging segments. It’s worth noting that Disney+ is a loss-leader and isn’t expected to turn a profit until 2024. Elsewhere there’s ESPN — one of Disney’s largest media properties — which has struggled for content during sports leagues closures. But with the NBA and Major League Baseball, among other sports, resuming play last week, investors will want an update on improved revenue outlook.

For the three months that ended June, Wall Street analysts expects the Burbank, Calif.-based company to lose 64 cents per share on revenue of $12.39 billion. This compares to the year-ago quarter when earnings came to $1.35 per share on revenue of $20.25 billion. For the full year, ending October, earnings are projected to decline 77% year over year to $1.33 per share, while full year revenue of $66.71 billion would decline 4.1% year over year.

The company’s grim revenue and profit outlook are the results of extended business closures, which first began in March when Disney announced that its U.S. theme parks would close due to the pandemic. The company has also pushed out several potential blockbuster films that were due for release during the summer. Given the recent earnings trend of “forgiveness,” the market is likely to forgive Disney this quarter and look past the numbers revealed from parks, film and ESPN business segments and focus on the long term.

That said, with the pandemic forcing more people to stream content at home, Disney+ needs to absolutely crush it, particularly given the impressive streaming numbers we’ve seen from Netflix (NFLX). There has also been reports that Disney could offset some of the box office losses by releasing movies directly through Disney+, at least in the United States. In other words, while Disney doesn’t need a magical quarter to re-ignite confidence in its stock price, it can’t miss on streaming.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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