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Why Is Disney (DIS) Down 12.2% Since Last Earnings Report?
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A month has gone by since the last earnings report for Walt Disney (DIS - Free Report) . Shares have lost about 12.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Disney due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Disney Q1 Earnings Tops Estimates, Revenues Jump Y/Y
The Walt Disney Company reported first-quarter fiscal 2022 adjusted earnings of $1.06 per share that beat the Zacks Consensus Estimate by 86% and surged significantly from 32 cents reported in the year-ago quarter.
Revenues jumped 34.3% year over year to $21.82 billion and beat the consensus mark by 2.9%.
Segment Details
Media and Entertainment Distribution (66.8% of revenues) revenues increased 15.2% year over year to $14.59 billion.
Revenues from Linear Networks inched up 0.2% year over year to $7.71 billion. Direct-to-Consumer revenues surged 33.8% year over year to $4.69 billion. Content Sales/Licensing and Other revenues soared 42.9% year over year to $2.43 billion.
Parks, Experiences and Products revenues (33.2% of revenues) surged 101.6% year over year to $7.23 billion.
Domestic revenues were $4.80 billion, significantly up from $1.49 billion reported in the year-ago quarter. International revenues increased significantly from the year-ago quarter’s $378 million to $861 million in the reported quarter.
However, revenues from Consumer Products decreased 8.6% year over year to $1.57 billion.
Subscriber Details
ESPN+ had 21.3 million paid subscribers at the end of the fiscal first quarter compared with 12.1 million at the end of the year-ago quarter.
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 rapidly growing subscriber base strengthens Disney’s position in the increasingly saturated streaming space currently dominated by Netflix and the growing prominence of services from AT&T and Comcast.
Markedly, Netflix missed its user-base target in the recently concluded fourth-quarter 2021. The streaming giant added 8.28 million paid subscribers globally in the quarter against the addition of 8.51 million in the year-ago quarter, missing its guidance of 8.5 million paid-subscriber additions.
Comcast’s Peacock had 24.5 million monthly active accounts in the United States at the end 2021.
AT&T’s HBO Max continued to gain from increasing subscriber base. In fourth-quarter 2021, subscription revenues improved 5.4% year over year to $3.82 billion due to higher HBO Max and HBO subscribers (up 13.1 million year over year).
Meanwhile, Disney’s Hulu ended the quarter with 45.3 million paid subscribers, up from 39.4 million reported in the year-ago quarter.
The average monthly revenue per paid subscriber for ESPN+ increased 15% year over year to $5.16 due to an increase in retail pricing.
The average monthly revenue per paid subscriber for Disney+ was $4.41, up 9% year over year.
The average monthly revenue per paid subscriber for Disney’s Hulu SVOD-only service declined 4% year over year to $12.96, due to lower per-subscriber advertising revenues and a higher mix of subscribers to the SVOD bundle.
The average monthly revenue per paid subscriber for Disney’s Hulu Live TV + SVOD service rose 16% from the year-ago quarter to $87.01, owing to higher advertising revenues per subscriber and increase in retail pricing.
Operating Details
Costs & expenses increased 22.7% year over year to $19.62 billion in the reported quarter.
Segmental operating income was $3.26 billion, significantly up from $1.33 billion reported in the year-ago quarter.
Media and Entertainment Distribution’s segmental operating income declined 44.3% year over year to $808 million.
Linear Networks’ operating income increased 13.3% to $1.50 billion.
Direct-to-Consumer operating loss was $593 million, wider than the year-ago quarter’s loss of $466 million. The increase in loss was primarily attributed to higher losses at Disney+, and to a lesser extent, at ESPN+.
Disney+’s profitability was negatively impacted by higher programming and production, as well as marketing and technology costs. Higher sports programming costs affected ESPN+’s profitability.
Content Sales/Licensing and Other operating loss was $98 million against operating income of $188 million reported in the year-ago quarter.
Parks, Experiences and Products’ operating income was $2.45 billion against the year-ago quarter’s operating loss of $119 million.
Domestic and International segments reported incomes of $1.56 billion and $21 million, respectively. Markedly, Domestic had reported a loss of $798 million in the year-ago quarter, while International had reported a loss of $262 million.
Consumer Products’ operating profit decreased 7.1% year over year to $874 million.
Further, interest expenses decreased 4% year over year to $311 million.
Balance Sheet
As of Jan 1, 2022, cash and cash equivalents were $14.44 billion compared with $15.96 billion as of Oct 2, 2021.
Total borrowings were $54.1 billion as of Jan 1, 2022, compared with $54.4 billion as of Oct 2, 2021.
Free cash outflow was $1.19 billion in the reported quarter compared with free cash flow of $1.52 billion in the previous quarter.
Outlook
For second-quarter fiscal 2022, Disney expects continued investments in content, which will drive up programming and production costs at Media and Entertainment Distribution.
Disney 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.
Moreover, Disney expects difficult comparison to impact content sales/licensing and other sales in the fiscal second quarter.
Disney expects these factors to hurt operating income by more than $200 million on a year-over-year basis.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
At this time, Disney has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Disney has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Disney (DIS) Down 12.2% Since Last Earnings Report?
A month has gone by since the last earnings report for Walt Disney (DIS - Free Report) . Shares have lost about 12.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Disney due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Disney Q1 Earnings Tops Estimates, Revenues Jump Y/Y
The Walt Disney Company reported first-quarter fiscal 2022 adjusted earnings of $1.06 per share that beat the Zacks Consensus Estimate by 86% and surged significantly from 32 cents reported in the year-ago quarter.
Revenues jumped 34.3% year over year to $21.82 billion and beat the consensus mark by 2.9%.
Segment Details
Media and Entertainment Distribution (66.8% of revenues) revenues increased 15.2% year over year to $14.59 billion.
Revenues from Linear Networks inched up 0.2% year over year to $7.71 billion. Direct-to-Consumer revenues surged 33.8% year over year to $4.69 billion. Content Sales/Licensing and Other revenues soared 42.9% year over year to $2.43 billion.
Parks, Experiences and Products revenues (33.2% of revenues) surged 101.6% year over year to $7.23 billion.
Domestic revenues were $4.80 billion, significantly up from $1.49 billion reported in the year-ago quarter. International revenues increased significantly from the year-ago quarter’s $378 million to $861 million in the reported quarter.
However, revenues from Consumer Products decreased 8.6% year over year to $1.57 billion.
Subscriber Details
ESPN+ had 21.3 million paid subscribers at the end of the fiscal first quarter compared with 12.1 million at the end of the year-ago quarter.
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 rapidly growing subscriber base strengthens Disney’s position in the increasingly saturated streaming space currently dominated by Netflix and the growing prominence of services from AT&T and Comcast.
Markedly, Netflix missed its user-base target in the recently concluded fourth-quarter 2021. The streaming giant added 8.28 million paid subscribers globally in the quarter against the addition of 8.51 million in the year-ago quarter, missing its guidance of 8.5 million paid-subscriber additions.
Comcast’s Peacock had 24.5 million monthly active accounts in the United States at the end 2021.
AT&T’s HBO Max continued to gain from increasing subscriber base. In fourth-quarter 2021, subscription revenues improved 5.4% year over year to $3.82 billion due to higher HBO Max and HBO subscribers (up 13.1 million year over year).
Meanwhile, Disney’s Hulu ended the quarter with 45.3 million paid subscribers, up from 39.4 million reported in the year-ago quarter.
The average monthly revenue per paid subscriber for ESPN+ increased 15% year over year to $5.16 due to an increase in retail pricing.
The average monthly revenue per paid subscriber for Disney+ was $4.41, up 9% year over year.
The average monthly revenue per paid subscriber for Disney’s Hulu SVOD-only service declined 4% year over year to $12.96, due to lower per-subscriber advertising revenues and a higher mix of subscribers to the SVOD bundle.
The average monthly revenue per paid subscriber for Disney’s Hulu Live TV + SVOD service rose 16% from the year-ago quarter to $87.01, owing to higher advertising revenues per subscriber and increase in retail pricing.
Operating Details
Costs & expenses increased 22.7% year over year to $19.62 billion in the reported quarter.
Segmental operating income was $3.26 billion, significantly up from $1.33 billion reported in the year-ago quarter.
Media and Entertainment Distribution’s segmental operating income declined 44.3% year over year to $808 million.
Linear Networks’ operating income increased 13.3% to $1.50 billion.
Direct-to-Consumer operating loss was $593 million, wider than the year-ago quarter’s loss of $466 million. The increase in loss was primarily attributed to higher losses at Disney+, and to a lesser extent, at ESPN+.
Disney+’s profitability was negatively impacted by higher programming and production, as well as marketing and technology costs. Higher sports programming costs affected ESPN+’s profitability.
Content Sales/Licensing and Other operating loss was $98 million against operating income of $188 million reported in the year-ago quarter.
Parks, Experiences and Products’ operating income was $2.45 billion against the year-ago quarter’s operating loss of $119 million.
Domestic and International segments reported incomes of $1.56 billion and $21 million, respectively. Markedly, Domestic had reported a loss of $798 million in the year-ago quarter, while International had reported a loss of $262 million.
Consumer Products’ operating profit decreased 7.1% year over year to $874 million.
Further, interest expenses decreased 4% year over year to $311 million.
Balance Sheet
As of Jan 1, 2022, cash and cash equivalents were $14.44 billion compared with $15.96 billion as of Oct 2, 2021.
Total borrowings were $54.1 billion as of Jan 1, 2022, compared with $54.4 billion as of Oct 2, 2021.
Free cash outflow was $1.19 billion in the reported quarter compared with free cash flow of $1.52 billion in the previous quarter.
Outlook
For second-quarter fiscal 2022, Disney expects continued investments in content, which will drive up programming and production costs at Media and Entertainment Distribution.
Disney 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.
Moreover, Disney expects difficult comparison to impact content sales/licensing and other sales in the fiscal second quarter.
Disney expects these factors to hurt operating income by more than $200 million on a year-over-year basis.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
At this time, Disney has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Disney has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.