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Will Disney (DIS) ETFs Shine Post Q3 Earnings?

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The Walt Disney Company (DIS - Free Report) reported strong third-quarter fiscal 2021 results on Aug 12. Earnings and revenues beat the Zacks Consensus Estimate and rose year over year. Shares of Disney rose 1% (as of Aug 13), driven by impressive earnings results.

Earnings Details

The company’s adjusted earnings of 80 cents per share in the fiscal third quarter surpassed the Zacks Consensus Estimate by 40.3%. Moreover, the metric surged 900% year over year. Revenues of $17.02 billion also rose 44.5% from the year-ago quarter and beat the consensus mark by 1.2%.

Accounting for about 74.5% of revenues, Media and Entertainment Distribution revenues were also up 18.4% year over year to $12.68 billion. Revenues from Linear Networks rose 15.7% to $6.95 billion. Furthermore, Direct-to-Consumer revenues grew 56.9% year over year to $4.25 billion. Content Sales/Licensing and Other revenues contracted 23% year over year to $1.68 billion.

Also, Parks, Experiences and Products revenues that make up for around 25.5% of revenues climbed 307.6% year over year to $4.34 billion. Notably, Walt Disney World Resort and Shanghai Disney Resort were open for the entire quarter. In the prior-year quarter, Walt Disney World Resort was closed for the entire period and Shanghai Disney Resort was open for only 48 days.

Moreover, Hong Kong Disneyland was open for 72 days in the current quarter and 10 days in the prior-year quarter. Disneyland Resort and Disneyland Paris were open for 65 days and 19 days, respectively, during the current quarter, whereas these businesses were closed for the entire year-ago quarter.

Disney’s segmental operating income rose 116.7% year over year to $2.38 billion. As of Jul 3, 2021, cash and cash equivalents were $16.07 billion compared with $15.89 billion as of Apr 3, 2021.

Disney+ Sees Impressive Subscription Growth

Disney+, as of Jul 3, 2021, had 116 million paid subscribers compared with 57.5 million as of Jun 27, 2020.

The average monthly revenue per paid subscriber for Disney+ was $4.16, down 10% year over year due to a higher mix of Disney+ Hotstar subscribers in the current quarter compared to the prior-year quarter.

Guidance

Disney+ now expects fewer net subscriber additions for its direct-to-consumer services in the second half of 2021. Moreover, the company now plans to launch STAR+, its stand-alone general entertainment and sports streaming service for Latin America, on Aug 31.

Commenting on the earnings results and the pandemic, Disney CEO Bob Chapek reportedly said, “We ended the third quarter in a strong position, and are pleased with the Company’s trajectory as we grow our businesses amidst the ongoing challenges of the pandemic. We continue to introduce exciting new experiences at our parks and resorts worldwide, along with new guest-centric services, and our direct-to-consumer business is performing very well, with a total of nearly 174 million subscriptions across Disney+, ESPN+ and Hulu at the end of the quarter, and a host of new content coming to the platforms.”

ETFs in Focus

The impressive results might prove to be a major plus for ETFs, especially those that have the largest allocation to this media and entertainment conglomerate.

iShares Evolved U.S. Media and Entertainment ETF (IEME - Free Report)

This actively-managed ETF employs data science techniques to identify companies with exposure to the media and entertainment sector. Holding 88 stocks in its basket, Disney occupies the second position with a 5.3% share. The fund accumulated $18.6 million in its asset base and charges 18 basis points (bps) in annual fees (read: ETFs to Tap the Blockbuster Debut of Marvel's Black Widow).

iShares U.S. Consumer Services ETF (IYC - Free Report)

This ETF offers exposure to 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 135 stocks in its basket, with Disney taking the third spot at 5.1%. The fund amassed $1.42 billion in its asset base. It charges 43 bps in annual fees from investors.

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 $14.80 billion in its asset base. It follows the Communication Services Select Sector Index and holds 26 stocks in its basket, with Disney occupying 4.6% weight. The product charges 12 bps in annual fees (read: Can Google ETFs Keep Gaining on Q2 Earnings Optimism?).