Disney+ growth, parks' reopening progress remain in focus for Q2 report
Media giant and theme park operator Disney (DIS) is scheduled to report results of its second fiscal quarter after the market close on May 13, with a conference call scheduled for 4:30 pm ET. What to watch:
1. DISNEY+: With its last quarterly report, Disney reported 94.9M paid subscribers as of January 2 for its Disney+ streaming service. The company also reported ESPN+ paid subscribers of 12.1M in Q1, versus 6.6M last year, and reported total Hulu paid subscribers of 39.4M in Q1, versus 30.4M a year prior.
"We believe the strategic actions we're taking to transform our Company will fuel our growth and enhance shareholder value, as demonstrated by the incredible strides we've made in our DTC business, reaching more than 146 million total paid subscriptions across our streaming services at the end of the quarter. We're confident that, with our robust pipeline of exceptional, high-quality content and the upcoming launch of our new Star-branded international general entertainment offering, we are well-positioned to achieve even greater success going forward." said CEO Bob Chapek at the time of the company's earnings.
Since then, at the company's virtual annual shareholders meeting on March 9, Chapek announced that Disney+ surpassed 100 million global paid subscribers "in just 16 months since its launch. Chapek said at that time that the company has set a target of 100+ new titles per year, which includes Disney Animation, Disney Live Action, Marvel, Star Wars, and National Geographic. "Our direct-to-consumer business is the company's top priority, and our robust pipeline of content will continue to fuel its growth," the executive added.
In an earnings preview note, Credit Suisse analyst Douglas Mitchelson said he thinks investors' focus is on Disney+ subscriber performance, theme park momentum as COVID-19 mandates ease in the U.S., and the company's longer-term earnings power in FY22-FY25. Following "soft" results from Netflix (NFLX), Disney+ investor views have moderated to around a 104M Disney+ subscriber level, according to Mitchelson, who said the Street consensus is near 109M and whose own forecast is for 104.5M subscribers.
2. THEME PARKS: At the time of its last earnings call, Disney said: "The most significant impact on operating income in the current quarter from COVID-19 was an estimated detriment of approximately $2.6B at the Disney Parks, Experiences and Products segment due to revenue lost as a result of the closures and reduced operating capacities. The impacts of COVID-19 on our Disney Media and Entertainment Distribution segment were less significant."
During the company's virtual annual shareholders meeting, Disney said Disneyland was opening in late April with limited capacity. On March 17, Disneyland Resort announced that Disneyland Park and Disney California Adventure Park would officially reopen to the public on April 30 with limited capacity.
On May 2, the company said in a blog post that Disneyland Resort in California, Walt Disney's original theme park, reopened on Friday for the first time in over a year.
On May 12, Morgan Stanley analyst Benjamin Swinburne raised the firm's price target on Disney to $210 from $200 as he raised his estimates to reflect a faster Parks recovery and a successful NFL renewal. Swinburne, who keeps an Overweight rating on Disney shares, said he is bullish on Disney's content cycle and a return to deleveraging in 2022.
3. FILMS: At the time of its last earnings call, Disney said: "Lower revenues due to the deferral or cancellation of significant film releases as a result of theater closures were largely offset by the related reduction in film cost amortization, marketing and distribution costs."
On March 8, The Wall Street Journal's R.T. Watson reported that more than 300 Cinemark (CNK) theaters didn't show Disney's (DIS) biggest new release as of that date, "Raya and the Last Dragon," as the animated movie grossed $8.6M in the U.S. and Canada over its opening weekend. The decision not to play "Raya" comes amid growing tension between Hollywood studios and movie theater chains over whether the theaters should get to show movies before they premiere on streaming services, and for how long, the report noted. Other publicly traded companies in the movie exhibition space include AMC Entertainment (AMC), Cineworld Group (CNNWF), Imax (IMAX), Marcus (MCS) and National CineMedia (NCMI).
Since then, on March 23, Disney Media & Entertainment Distribution announced new release details for a number of titles on Walt Disney Studios' upcoming slate of films. Disney said: "Following the successful release of 'Raya and The Last Dragon,' the highly anticipated live-action film 'Cruella' and Marvel Studios' long-awaited 'Black Widow' will launch simultaneously in theaters and on Disney+ with Premier Access in most Disney+ markets on Friday, May 28 and on Friday, July 9, respectively. Similar to the launch of Disney and Pixar's Academy Award-nominated 'Soul' that delighted Disney+ subscribers during the holidays, Disney and Pixar's 'Luca' will stream directly in homes worldwide exclusively on Disney+ beginning Friday, June 18, as a special offering to kick-off the summer season."
On the morning of the company's planned earnings release, the official Twitter account of Disney+ tweeted: "Join Dwayne Johnson and Emily Blunt on the adventure of a lifetime. See Disney's @JungleCruise in theaters or order it on #DisneyPlus with Premier Access July 30! Additional fee required."
4. CONSENSUS: In terms of overall results for the second quarter, analysts are calling for Disney to report total revenue of $15.87B. The consensus Q1 earnings forecast stands at 27c per share, better than the forecast for 21c per share in earnings that analysts projected 90 days ago. For the June-end quarter, analysts' consensus currently calls for revenue of $17.07B and for the "House of Mouse" to post a profit of 67c per share.
Keywords: Disney+, earnings, earnings watch, OTT, streaming, day-and-date release, theme parks, Disney World, Disneyland