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Will Disney (DIS) ETFs Shine Post Q1 Earnings?

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The Walt Disney Company (DIS - Free Report) reported decent first-quarter fiscal 2021 results on Feb 11. Both earnings and revenues beat the respective Zacks Consensus Estimate. Hurt by the coronavirus crisis, the metrics, however, declined year over year. Shares of Disney declined 1.7% (as of Feb 12), largely due to weak year-over-year comparisons.

Earnings Details

The company’s adjusted earnings of 32 cents per share in the fiscal first quarter surpassed the Zacks Consensus Estimate by 171.1%. However, the metric declined 79.1% year over year. Revenues of $16.25 billion too declined 22.2% from the year-ago quarter but outpaced the consensus mark by 2.6%.

Accounting for about 77.9% of revenues, Media and Entertainment Distribution revenues decreased 4.8% year over year to $12.66 billion. Revenues from Linear Networks rose 2.1% to $7.69 billion. Furthermore, Direct-to-Consumer revenues climbed 73% year over year to $3.50 billion. Content Sales/Licensing and Other revenues decreased 56.5% to $1.70 billion.

Also, Parks, Experiences and Products revenues that contribute around 22.1% of revenues declined 52.7% year over year to $3.59 billion.

Disney’s segmental operating income slid 66.7% year over year to $1.33 billion. The pandemic affected the metric by $2.6 billion. The pandemic hurt the company’s Parks, Experiences and Products segment the most as its parks and resorts have remained shut or operated at decreased capacity along with suspension of cruise ship sailings since late second-quarter fiscal 2020.

As of Jan 2, 2021, Disney’s cash and cash equivalents were $17.07 billion compared with $17.91 billion as of Oct 3, 2020.

Disney+ Sees Impressive Subscription Growth

Disney+, as of Jan 2, 2021, had 94.9 million paid subscribers, suggesting solid growth since its launch in November 2019. The company saw an addition of more than 21.2 million users sequentially.

The average monthly revenue per paid subscriber for Disney+ was $4.03, decreasing 28% year over year.

Guidance

Disney continues to expect an adverse impact from the ongoing health crisis in fiscal 2021. For second-quarter fiscal 2021, it expects ESPN to benefit from the timing of college football and other sporting events. However, lower political advertising business will dent the company’s broadcasting business. Furthermore, the shift of the Academy Awards to the fiscal third quarter will hurt fiscal second-quarter top-line growth. Moreover, the company expects Disneyland and Disneyland Paris to remain shut for the entirety of the fiscal second quarter. However, Disney expects Hong Kong Disneyland to reopen during the quarter.

Commenting on the earnings results and the pandemic, Disney CEO Bob Chapek reportedly said, “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.”

ETFs in Focus

The mixed results may hugely affect the ETFs, especially those that have the largest allocation to this media and entertainment conglomerate.

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. Holding 89 stocks in its basket, Disney occupies the third position with a 5.3% share. The fund accumulated $16.1 million in its asset base and charges 18 bps in annual fees (read: ETFs to Shine as Disney Works on Revamping Streaming Arm).

iShares U.S. Consumer Services 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 Dow Jones U.S. Consumer Services Capped Index. It holds 133 stocks in its basket with Disney taking the second spot at 7.9%. The fund amassed $1.28 billion in its asset base. It charges 43 bps in annual fees from investors (read: 5 ETF Areas to Gain on COVID-19 Stimulus Deal).

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 $11.90 billion in its asset base. It follows the Communication Services Select Sector Index and holds 26 stocks in its basket with Disney occupying the seventh position at 4.4%. The product charges 12 bps in annual fees (read: Will Google ETFs Keep Shining on Q4 Earnings Optimism?).

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