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Disney (DIS) Q4 Earnings Miss Estimates, Revenues Rise Y/Y

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The Walt Disney (DIS - Free Report) reported fourth-quarter fiscal 2021 adjusted earnings of 37 cents per share, which compares favorably with the loss of 20 cents per share reported in the year-ago quarter.

However, the bottom line missed the Zacks Consensus Estimate by 27.4%.

Revenues were $18.53 billion, which increased 26% from the prior-year quarter. This was driven by strong performances delivered by Disney Media and Entertainment Distribution, and Disney Parks, Experiences and Products.

However, the top line lagged the Zacks Consensus Estimate of $18.85 billion.

Notably, Disney has lost 3.7% on a year-to-date basis compared with the industry’s decline of 37.5%.

 

Zacks Investment ResearchImage Source: Zacks Investment Research

 

Segment Details

Media and Entertainment Distribution (70.6% of revenues): Revenues from the segment climbed 9% year over year to $13.08 billion.

Direct-to-Consumer revenues rose 38% year over year to $4.56 billion, driven by solid growth in the paid subscriber base of Disney+, ESPN+ and Hulu.

Content Sales/Licensing and Other revenues rose 9% year over year to $2.05 billion.

Revenues from Linear Networks decreased 4% year over year to $6.69 billion. This was due to sluggishness among domestic as well as international channels.

Parks, Experiences and Products (29.4% of revenues): Revenues from the segment surged 99% year over year to $5.45 billion.

Domestic revenues increased from $935 million in the year-ago period to $3.47 billion in the reported quarter. International revenues rose 46% year over year to $693 million in the quarter under review.

Growth in these revenues was primarily attributed to the reopening of the company's parks and resorts for the entire quarter.

In the prior-year quarter, Shanghai Disney Resort was open for the entire quarter, whereas The Walt Disney World Resort and Disneyland Paris were open for 12 weeks. Further, Hong Kong Disneyland Resort was open for four weeks, while Disneyland Resort was closed for the entire quarter.

Revenues from Consumer Products decreased 3% year over year to $1.28 billion. This was due to low royalties earned from the game titles — Marvel's Avengers and Twisted Wonderland.

The Walt Disney Company Price, Consensus and EPS Surprise

 

The Walt Disney Company Price, Consensus and EPS Surprise

The Walt Disney Company price-consensus-eps-surprise-chart | The Walt Disney Company Quote

Subscriber Details

ESPN+ had 17.1 million paid subscribers at the end of the fiscal fourth quarter, up 66% year over year.

As of Oct 2, 2021, Disney+ had 118.1 million paid subscribers, up 60% from the year-ago quarter.

Hulu ended the quarter with 43.8 million paid subscribers, up 20% year over year.

The average monthly revenue per paid subscriber for ESPN+ increased 4% year over year to $4.74 due to increased retail pricing.

The average monthly revenue per paid subscriber for Disney+ was $4.12, down 9% year over year due to a higher mix of Disney+ Hotstar subscribers in the current quarter than the prior-year quarter.

The average monthly revenue per paid subscriber for Disney's Hulu SVOD-only service increased 1% year over year to $12.75. This was driven by a surge in per-subscriber premium add-on and advertising revenues, along with a lower mix of wholesale subscribers.

The average monthly revenue per paid subscriber for Disney's Hulu Live TV + SVOD service rose 18% from the year-ago quarter to $84.89, owing to increases in retail pricing, per-subscriber advertising revenues and per-subscriber premium.

Operating Details

Costs & expenses increased 18.3% year over year to $17.9 billion in the reported quarter.

Segmental operating income surged from $606 million to $1.59 billion.

Media and Entertainment Distribution segmental operating income declined 39% year over year to $947 million.

Linear Networks operating income decreased 11% to $1.64 billion. Moreover, Direct-to-Consumer operating loss was $630 million compared with the year-ago quarter's loss of $374 million.

Content Sales/Licensing and Other operating loss was $65 million against the operating income of $86 million in the prior-year quarter.

Parks, Experiences and Products' operating income was $640 million against the year-ago quarter's operating loss of $945 million.

Domestic operating income was $244 million against an operating loss of $1.3 billion in the year-ago period. The International segment reported an operating loss of $222 million compared with a loss of $343 million in the year-ago quarter.

Consumer Products' operating income decreased 8% year over year to $618 million.

Interest expenses decreased 36% year over year to $317 million.

Balance Sheet

As of Oct 2, 2021, cash and cash equivalents were $15.96 billion compared with $16.07 billion as of Jul 3, 2021.

Total borrowings were $54.4 billion as of Oct 2, 2021, compared with $55.8 billion as of Jul 3, 2021.

Free cash flow was $1.52 billion in the reported quarter compared with free cash flow of $446 million in the previous quarter.

Outlook

The company intends to expand its local content portfolio in Asia, India, Europe, and Latin America in fiscal 2022.

Disney+ net additions are expected to be higher in the second half of fiscal 2022 from the first half.

The company expects to incur elevated costs in fiscal 2022 due to expenses associated with new projects such as Star Wars: Galaxy's Edge, Avengers Campus, and the Epcot expansion, and cruise ship expansion.

Zacks Rank & Stocks to Consider

Currently, Disney carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the consumer-discretionary sector are BJ’s Wholesale Club (BJ - Free Report) , TEGNA (TGNA - Free Report) and Sirius XM (SIRI - Free Report) , each carrying Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rates for BJ’s Wholesale Club, TEGNA and Sirius XM are currently pegged at 8.42%, 10% and 13.16%, respectively.

Further, BJ’s Wholesale Club, TEGNA and Sirius XM have gained 65.7%, 51.4% and 1.1%, respectively, on a year-to-date basis.

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