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How Are Disney (DIS) ETFs Reacting to Q2 Earnings?
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The Walt Disney Company (DIS - Free Report) reported relatively mixed second-quarter fiscal 2022 results on May 11. Earnings and revenues lagged the Zacks Consensus Estimate but compared favorably with the respective year-ago figures. Shares of Disney have lost 0.5% since the earnings release (as of May 13), primarily due to weaker-than-expected earnings results.
Commenting on the earnings results, Bob Chapek, CEO, The Walt Disney Company, reportedly said that “Our strong results in the second quarter, including fantastic performance at our domestic parks and continued growth of our streaming services — with 7.9 million Disney+ subscribers added in the quarter and total subscriptions across all our DTC offerings exceeding 205 million — once again proved that we are in a league of our own.”
The earnings results might impact certain ETFs, especially those like iShares Evolved U.S. Media and Entertainment ETF, iShares U.S. Consumer Services ETF and The Communication Services Select Sector SPDR Fund that have the largest allocation to this media and entertainment conglomerate.
Earnings Details
DIS’s adjusted earnings of $1.08 per share in the fiscal second quarter missed the Zacks Consensus Estimate by 10%. However, the metric rose 36.7% from the year-ago quarter’s number. Revenues of $19.24 billion also rose 23% from the year-ago quarter’s reading but missed the consensus mark by 4.9%. Revenues suffered a $1-billion hit from the early close of a film and TV licensing contract for Disney to run the programs on its streaming platform.
Accounting for 70.8% of revenues, Media and Entertainment Distribution revenues were up 9.5% year over year to $13.62 billion. Revenues from Linear Networks also jumped 5.5% from the prior-year level to $7.11 billion. Further, Direct-to-Consumer revenues increased 22.6% year over year to $4.90 billion. Content Sales/Licensing and Other revenues contracted 2.6% year over year to $1.86 billion.
Parks, Experiences and Products revenues, representing 34.6% of the top line, climbed 109.6% year over year to $6.65 billion. The reopening of Disney’s parks and resorts supported revenue and operating income growth. Revenues from Consumer Products were up 0.3% year over year to $1.18 billion.
Disney’s segmental operating income was $3.69 billion, up 50.1% from the year-ago quarter’s level. As of Apr 2, 2022, cash and cash equivalents were $13.27 billion compared with $14.44 billion as of Jan 1, 2022.
Disney+ Sees Impressive Subscription Growth
Disney+, as of Apr 2, 2022, had 137.7 million paid subscribers compared with 103.6 million as of Apr 2, 2021. The figure was better than the Zacks Consensus Estimate for paid subscribers of 135.2 million. The average monthly revenue per paid subscriber for Disney+ was $4.35, up 9% year over year.
Guidance
For third-quarter fiscal 2022, Disney expects continued investments in content, which will drive the programming and production costs at Media and Entertainment Distribution. However, per DIS, closures of theme parks in Asia due to COVID-19 could reduce the operating income by up to $350 million in the fiscal third quarter. Management expects to cut the overall film and TV spending by $1 billion to $32 billion in fiscal 2022.
ETFs in Focus
iShares Evolved U.S. Media and Entertainment ETF
This actively-managed ETF employs data-science techniques to identify companies with exposure to the media and entertainment sector. IEME holds 91 stocks in its basket, with Disney grabbing a 4.3% share in the portfolio. IEME accumulated $10.5 million in its asset base and charges 18 basis points (bps) of annual fees. IEME has inched up 2.6% since the DIS’ earnings release (as of May 13).
iShares U.S. Consumer Discretionary ETF (IYC - Free Report)
This ETF offers exposure to the 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. IYC holds 174 stocks in its basket, with Disney having 3.9% weight. IYC amassed $937.1 million in its asset base and charges 41 bps as annual fees from investors. IYC has gained 1.5% since Disney’s earnings results (as of May 13).
The Communication Services Select Sector SPDR Fund (XLC - Free Report)
This ETF offers exposure to the communication services sector of the S&P 500 Index and accumulated $9.30 billion in its asset base. XLC follows the Communication Services Select Sector Index and holds 26 stocks in its basket, with Disney occupying 3.8% weight. XLC charges 10 bps of annual fees and has increased 1.6% since the earnings release (as of May 13) (read: How Are Google ETFs Reacting to Dismal Q1 Earnings?).
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How Are Disney (DIS) ETFs Reacting to Q2 Earnings?
The Walt Disney Company (DIS - Free Report) reported relatively mixed second-quarter fiscal 2022 results on May 11. Earnings and revenues lagged the Zacks Consensus Estimate but compared favorably with the respective year-ago figures. Shares of Disney have lost 0.5% since the earnings release (as of May 13), primarily due to weaker-than-expected earnings results.
Commenting on the earnings results, Bob Chapek, CEO, The Walt Disney Company, reportedly said that “Our strong results in the second quarter, including fantastic performance at our domestic parks and continued growth of our streaming services — with 7.9 million Disney+ subscribers added in the quarter and total subscriptions across all our DTC offerings exceeding 205 million — once again proved that we are in a league of our own.”
The earnings results might impact certain ETFs, especially those like iShares Evolved U.S. Media and Entertainment ETF, iShares U.S. Consumer Services ETF and The Communication Services Select Sector SPDR Fund that have the largest allocation to this media and entertainment conglomerate.
Earnings Details
DIS’s adjusted earnings of $1.08 per share in the fiscal second quarter missed the Zacks Consensus Estimate by 10%. However, the metric rose 36.7% from the year-ago quarter’s number. Revenues of $19.24 billion also rose 23% from the year-ago quarter’s reading but missed the consensus mark by 4.9%. Revenues suffered a $1-billion hit from the early close of a film and TV licensing contract for Disney to run the programs on its streaming platform.
Accounting for 70.8% of revenues, Media and Entertainment Distribution revenues were up 9.5% year over year to $13.62 billion. Revenues from Linear Networks also jumped 5.5% from the prior-year level to $7.11 billion. Further, Direct-to-Consumer revenues increased 22.6% year over year to $4.90 billion. Content Sales/Licensing and Other revenues contracted 2.6% year over year to $1.86 billion.
Parks, Experiences and Products revenues, representing 34.6% of the top line, climbed 109.6% year over year to $6.65 billion. The reopening of Disney’s parks and resorts supported revenue and operating income growth. Revenues from Consumer Products were up 0.3% year over year to $1.18 billion.
Disney’s segmental operating income was $3.69 billion, up 50.1% from the year-ago quarter’s level. As of Apr 2, 2022, cash and cash equivalents were $13.27 billion compared with $14.44 billion as of Jan 1, 2022.
Disney+ Sees Impressive Subscription Growth
Disney+, as of Apr 2, 2022, had 137.7 million paid subscribers compared with 103.6 million as of Apr 2, 2021. The figure was better than the Zacks Consensus Estimate for paid subscribers of 135.2 million. The average monthly revenue per paid subscriber for Disney+ was $4.35, up 9% year over year.
Guidance
For third-quarter fiscal 2022, Disney expects continued investments in content, which will drive the programming and production costs at Media and Entertainment Distribution. However, per DIS, closures of theme parks in Asia due to COVID-19 could reduce the operating income by up to $350 million in the fiscal third quarter. Management expects to cut the overall film and TV spending by $1 billion to $32 billion in fiscal 2022.
ETFs in Focus
iShares Evolved U.S. Media and Entertainment ETF
This actively-managed ETF employs data-science techniques to identify companies with exposure to the media and entertainment sector. IEME holds 91 stocks in its basket, with Disney grabbing a 4.3% share in the portfolio. IEME accumulated $10.5 million in its asset base and charges 18 basis points (bps) of annual fees. IEME has inched up 2.6% since the DIS’ earnings release (as of May 13).
iShares U.S. Consumer Discretionary ETF (IYC - Free Report)
This ETF offers exposure to the 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. IYC holds 174 stocks in its basket, with Disney having 3.9% weight. IYC amassed $937.1 million in its asset base and charges 41 bps as annual fees from investors. IYC has gained 1.5% since Disney’s earnings results (as of May 13).
The Communication Services Select Sector SPDR Fund (XLC - Free Report)
This ETF offers exposure to the communication services sector of the S&P 500 Index and accumulated $9.30 billion in its asset base. XLC follows the Communication Services Select Sector Index and holds 26 stocks in its basket, with Disney occupying 3.8% weight. XLC charges 10 bps of annual fees and has increased 1.6% since the earnings release (as of May 13) (read: How Are Google ETFs Reacting to Dismal Q1 Earnings?).