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How Are Disney (DIS) ETFs Reacting to Q1 Earnings?

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The Walt Disney Company (DIS - Free Report) reported relatively impressive first-quarter fiscal 2022 results on Feb 9. Earnings and revenues surpassed the Zacks Consensus Estimate and compared favorably with the year-ago figure. Shares of Disney rose 3.4% (as of Feb 10), largely due to stronger-than-expected earnings results.

The earnings results might support 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

The company’s adjusted earnings of $1.06 per share in the fiscal first quarter surpassed the Zacks Consensus Estimate by 86%. However, the metric compares favorably with the earnings of 32 cents per share reported in the year-ago quarter. Revenues of $21.82 billion also rose 34.3% from the year-ago quarter and surpassed the consensus mark by 2.9%.

Accounting for about 66.8% of revenues, Media and Entertainment Distribution revenues were also up 15.2% year over year to $14.59 billion. Revenues from Linear Networks also jumped 0.2% from the prior year to $7.71 billion. Furthermore, Direct-to-Consumer revenues increased 33.8% year over year to $4.69 billion. Content Sales/Licensing and Other revenues expanded 42.9% year over year to $2.43 billion.

Also, Parks, Experiences and Products revenues that make up for around 33.2% of revenues climbed 101.6% year over year to $7.23 billion. Notably, the reopening of the company’s parks and resorts supported revenue and operating income growth. Revenues from Consumer Products were down 8.6% year over year to $1.57 billion.

Disney’s segmental operating income was $3.26 billion, significantly up from $1.33 billion reported in the year-ago quarter. As of Jan 1, 2022, cash and cash equivalents were $14.44 billion compared with $15.96 billion as of Oct 2, 2021.

Disney+ Sees Impressive Subscription Growth

Disney+, as of Jan 1, 2022, had 129.8 million paid subscribers compared with 94.9 million as of Jan 2, 2021. The figure was better than the Zacks Consensus Estimate for paid subscribers of 124.7 million. The average monthly revenue per paid subscriber for Disney+ was $4.41, up 9% year over year.

Guidance

For second-quarter fiscal 2022, Disney expects continued investments in content, which will drive up programming and production costs at Media and Entertainment Distribution. The company expects programming and production expenses to increase by roughly $800 million to $1 billion, including programming fees for Hulu Live. At linear networks, Disney expects programming and production expenses to increase by approximately $500 million.

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. Holding 92 stocks in its basket, Disney occupies the second position with a 4.9% share. The fund accumulated $16.9 million in its asset base and charges 18 basis points (bps) in annual fees. The fund is down 0.3% since the earnings release.

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

This ETF offers exposure to 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. It holds 175 stocks in its basket, with Disney taking the third spot at 4.3%. The fund amassed $1.15 billion in its asset base. It charges 41 bps in annual fees from investors. It has lost 1.4% since Disney’s earnings results.

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 $12.22 billion in its asset base. It follows the Communication Services Select Sector Index and holds 27 stocks in its basket, with Disney occupying 4.8% weight. The product charges 10 bps in annual fees. XLC is down 1.4% since the earnings release (read: Meta Platforms Sinks Post Dismal Q4 Earnings: ETFs in Focus).

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