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Closure of Parks & Theaters to Mar Disney (DIS) Q4 Earnings

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Disney’s (DIS - Free Report) fourth-quarter fiscal 2020 results are expected to reflect the setbacks it suffered from the closure of its theme parks and cruise ships, as well as the postponement of movie releases due to the coronavirus outbreak.

Disney kept the California and Florida parks closed in the to-be-reported quarter. Shanghai Disney Resort re-opened in May, while Hong Kong Disneyland Resort, despite reopening in late June, was closed again in July.

Reduced capacity due to strict social-distancing norms is expected to have hurt occupancy, thereby negatively impacting top-line growth.

The Zacks Consensus Estimate for Parks, Experiences & Consumer Products revenues is currently pegged at $2.26 billion, indicating a decline of 66% year over year.

Click here to know how Disney’s overall fourth-quarter fiscal 2020 results are likely to be.

The Walt Disney Company Price and EPS Surprise

Studio Entertainment Revenues to Decline

Disney’s Studio Entertainment segment revenues are expected to decline due to lack of any major release amid shutdown of movie halls.

In the to-be-reported quarter, Disney updated its release calendar to factor in the continued uncertainty over the reopening of theaters in the United States amid the coronavirus pandemic.

The coronavirus outbreak forced this Zacks Rank #4 (Sell) company to reschedule upcoming releases including Marvel’s Black Widow, Eternals and Spielberg’s West Side Story among others to 2021 release.

The Zacks Consensus Estimate for Studio Entertainment revenues is currently pegged at $1.81 billion, suggesting decline of 45.3% from the figure reported in the year-ago quarter.

Ad Revenues Expected to Rebound

Improvement in ad demand and spending is expected to have benefited Disney-division ESPN’s ad-sales business, much similar to what cable giant Comcast (CMCSA - Free Report) , Alphabet (GOOGL - Free Report) division Google and Twitter (TWTR - Free Report) experienced in the July-September quarter.

Notably, Comcast’s advertising revenues increased 11.8% year over year driven by an increase in political advertising revenues.

Notably, Google announced third-quarter ad revenues of $37.09 billion, up 9.8% year over year driven by higher advertiser spend in Search and YouTube. Further, Twitter’s third-quarter advertising revenues increased 15% to $808 million.

Several live sporting events resumed on ESPN in the fiscal fourth quarter including Major League Soccer on Jul 8, Major League Baseball on Jul 23, and the NBA. Disney expects ESPN's ad sales in the fiscal fourth quarter, including the benefit of the 53rd week, to benefit significantly, particularly from the NBA.

The Zacks Consensus Estimate for Media Networks revenues is currently pegged at $6.56 billion, suggesting decline of 2.3% from the figure reported in the year-ago quarter.

Disney+’s Solid User Base to Boost Top Line

Notably, as of Aug 3, Disney+’s subscriber base had surpassed 60.5 million, led by higher media consumption during lockdowns and following of pandemic-related social-distancing norm.

On Sep 4, Disney released much-anticipated movie Mulan to Disney+ subscribers in the United States, Canada, Australia, New Zealand and a number of countries in Western Europe on a premier-access basis. The movie is available to U.S. Disney+ subscribers for $29.99.

According to Sensor Tower, downloads of the Disney+ app spiked 68% from Sep 4 through Sep 6, compared to one weekend prior. Moreover, consumer spending on Disney+ also spiked 193% over the same period.

Additionally, Disney+ Hotstar debuted in Indonesia during the to-be-reported quarter. This expansion is likely to have aided subscriber base.

However, Disney expects DTC and the international segment to generate roughly $1.1 billion in operating losses for the fiscal fourth quarter. Markedly, DTC loss is expected to improve by nearly $100 million year over year, driven by lower losses at Hulu and ESPN+, partially offset by continued investment in Disney+.

The Zacks Consensus Estimate for DTC & International/Consumer Products revenues is currently pegged at $4.47 billion, indicating 30.5% growth from the figure reported in the year-ago quarter.

Meanwhile, the Zacks Consensus Estimate for DTC & International/Consumer Products operating loss is currently pegged at $1.06 billion. The company had reported segmental operating loss of $740 million in the year-ago quarter.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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