Disney ETFs in Focus Ahead of Q1 Earnings

Global media and entertainment company The Walt Disney Company DIS is set to report first-quarter fiscal 2022 results on Feb 9. The company has lost nearly 18.9% in the past three months.

Let’s take a look at this entertainment giant’s fundamentals ahead of its earnings release.

Inside Our Methodology

Disney has a Zacks Rank #5 (Strong Sell) and an Earnings ESP of 0.00%. According to our surprise prediction methodology, the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) stock with a positive Earnings ESP increases the odds of an earnings beat. Meanwhile, a Zacks Rank #4 (Sell) or 5 (Strong Sell) stock is best avoided going into the earnings announcement, especially when the company is seeing negative estimate revisions. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Zacks Consensus Estimate for Disney’s earnings has moved down 3.3% to 58 cents per share over the past 30 days, indicating an increase of 81.3% year over year. Notably, the company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, missing in one, the average surprise being 89.11%. The consensus mark for revenues is pegged at $21.15 billion, suggesting growth of 30.1% from the year-ago quarter’s reported figure. The stock belongs to a bottom-ranked Zacks Industry (bottom 6%) and has a Growth Score of B.

What to Watch?

Market participants are upbeat about improving U.S. economic conditions, as reflected by encouraging fourth-quarter earnings results and a very upbeat jobs report for January. The improving labor market conditions were observed despite the rising cases of the Omicron variant of coronavirus.

Investors are closely tracking the cyclical sectors, which are showing strength as global demand and economic growth levels are on the path of recovery from the pandemic lows. The coronavirus vaccine rollout is gradually controlling the outbreak's spread across the globe. The optimism surrounding the reopening of global economies and increasing demand is painting a rosy picture for the cyclical sectors. Major retailers, restaurants and hotels, theme and amusement parks plus cruises in the United States are reopening, both domestically as well as internationally.

Resultantly, Disney’s first-quarter fiscal 2022 earnings results are projected to gain from improving advertising revenues along with strength in Parks, Experiences and Products segments. Going on, the resumption of  live sporting events is believed to have provided some support in the increase of advertising revenues, thereby boosting revenue growth in the Media and Entertainment Distribution arm.

It is worth noting here that the pandemic compelled people to maintain social distancing and work remotely. More and more people are spending time at home, keeping with the safe-distancing guidelines and switching to modes of in-house entertainment.

Thus, the major focus will be on Disney+’s subscriber growth rate as the company has a strong content portfolio. It made Shang-Chi And The Legend Of The Ten Rings and Jungle Cruise available on Disney+ during the to-be-reported quarter.

Commenting on Disney’s expected performance in the fiscal first quarter, BofA Securities analyst Jessica Reif Ehrlich (Buy) has mentioned that “DIS remains well positioned for the recovery driven by a continued increase in capacity at theme parks and an improving content slate in the second half of fiscal 2022," per a Kiplinger article.

ETFs in Focus

Given this, ETFs with the highest allocation to the social media giant will be in focus going into its earnings announcement. These funds are potential movers if Disney comes up with an earnings surprise. While there are several ETFs in the space with Disney in their basket, we have highlighted funds that have high exposure to this global media and entertainment company (see: all the Consumer Discretionary ETFs here):

iShares Evolved U.S. Media and Entertainment ETF IEME

This actively-managed ETF employs data science techniques to identify companies with exposure to the media and entertainment sector. Holding 92 stocks in its basket, Disney occupies the third position with a 4.7% share. The fund accumulated $16.3 million in its asset base and charges 18 basis points (bps) in annual fees.

iShares U.S. Consumer Discretionary ETF IYC

This ETF offers exposure to U.S. companies that distribute food, drugs, general retail items and media by tracking the Russell 1000 Consumer Disc 40 Act 15/22.5 Daily Capped Index. It holds 175 stocks in its basket, with Disney taking the fifth spot at 4.1%. The fund amassed $1.13 billion in its asset base. It charges 41 bps in annual fees from investors.

The Communication Services Select Sector SPDR Fund XLC

This ETF offers exposure to the communication services sector of the S&P 500 Index and accumulated $12.45 billion in its asset base. It follows the Communication Services Select Sector Index and holds 27 stocks in its basket, with Disney occupying 4.6% weight. The product charges 10 bps in annual fees (read: Meta Platforms Sinks Post Dismal Q4 Earnings: ETFs in Focus).

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