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Why Is Disney (DIS) Down 1% Since Last Earnings Report?
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It has been about a month since the last earnings report for Walt Disney (DIS - Free Report) . Shares have lost about 1% 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 drivers.
Disney Q2 Earnings Miss Estimates, Revenues Jump Y/Y
The Walt Disney Company reported second-quarter fiscal 2022 adjusted earnings of $1.08 per share which missed the Zacks Consensus Estimate by 10%. The figure however increased 36.7% from the year-ago quarter.
Revenues increased 23% year over year to $19.24 billion but missed the consensus mark by 4.96%. Revenues took a $1 billion hit from the early termination of a film and TV licensing agreement so that Disney could use the programming on its streaming services.
Segment Details
Media and Entertainment Distribution (70.8% of revenues) revenues increased 9.5% year over year to $13.62 billion.
Revenues from Linear Networks increased 5.5% year over year to $7.11 billion. Direct-to-Consumer revenues rose 22.6% year over year to $4.9 billion. Content Sales/Licensing and Other revenues declined 2.6% year over year to $1.86 billion.
Parks, Experiences and Products revenues (34.6% of revenues) surged 109.6% year over year to $6.65 billion.
Domestic revenues were $4.89 billion, significantly up from $1.73 billion reported in the year-ago quarter. International revenues increased significantly from the year-ago quarter’s $262 million to $574 million in the reported quarter.
Revenues from Consumer Products inched up 0.3% year over year to $1.18 billion.
Subscriber Details: Disney+
ESPN+ had 22.3 million paid subscribers at the end of the fiscal second quarter compared with 13.8 million at the end of the year-ago quarter.
Disney+, as of Apr 2, 2022, had 137.7 million paid subscribers compared with 103.6 million as of Apr 2, 2021. The figure was better than the Zacks Consensus Estimate for paid subscribers of 135.2 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 first-quarter 2022. Netflix lost 0.20 million paid subscribers globally against the addition of 3.98 million in the year-ago quarter, missing its guidance of 2.5 million paid-subscriber additions.
Comcast’s Peacock ended the first quarter of 2022 with 28 million monthly active accounts, up from 24.5 million Comcast reported for the platform at the end of 2021.
AT&T’s HBO Max continued to gain from its increasing subscriber base. In first-quarter 2022, subscription revenues improved 4.4% to $3,997 million due to higher HBO Max and HBO subscribers (up 12.8 million year over year).
Meanwhile, Disney’s Hulu ended the quarter with 45.6 million paid subscribers, up from 41.6 million reported in the year-ago quarter.
The average monthly revenue per paid subscriber for ESPN+ increased 4% year over year to $4.73 due to an increase in retail pricing.
The average monthly revenue per paid subscriber for Disney+ was $4.35, up 9% year over year.
The average monthly revenue per paid subscriber for Disney’s Hulu SVOD-only service increased 6% year over year to $12.77 due to an increase in retail pricing and, to a lesser extent, higher per-subscriber advertising revenue.
The average monthly revenue per paid subscriber for Disney’s Hulu Live TV + SVOD service rose 8% from the year-ago quarter to $88.77, owing to higher advertising revenues per subscriber and an increase in retail pricing.
Operating Details
Costs & expenses increased 24.6% year over year to $17.64 billion in the reported quarter.
Segmental operating income was $3.69 billion, up 50.1% from the year-ago quarter.
Media and Entertainment Distribution’s segmental operating income declined 32.3% year over year to $1.94 billion. Linear Networks’ operating income decreased 1.2% to $2.81 billion.
Direct-to-Consumer operating loss was $887 million, wider than the year-ago quarter’s loss of $290 million. The increase in operating loss was due to higher losses at Disney+ and ESPN+ and lower operating income at Hulu.
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 income was $16 million compared with operating income of $312 million reported in the year-ago quarter.
Parks, Experiences and Products’ operating income was $1.75 billion against the year-ago quarter’s operating loss of $406 million.
The Domestic segment reported an income of $1.38 billion against a loss of $587 million reported in the year-ago quarter. International segment reported a loss of $268 million, which was narrower than the reported loss of $380 million in the year-ago quarter.
Consumer Products’ operating profit increased 13.7% year over year to $638 million.
Further, interest expenses increased 10.9% year over year to $355 million.
Balance Sheet
As of Apr 2, 2022, cash and cash equivalents were $13.27 billion compared with $14.44 billion as of Jan 1, 2022.
Total borrowings were $46.6 billion as of Apr 2, 2022, compared with $54.1 billion as of Jan 1, 2022.
Free cash flow was $686 million in the reported quarter compared with free cash outflow of $1.19 billion in the previous quarter.
Outlook
For third-quarter fiscal 2022, Disney expects continued investments in content, which will drive up programming and production costs at Media and Entertainment Distribution.
However, per the company, closures of theme parks in Asia due to COVID-19 could reduce operating income by up to $350 million in the fiscal third quarter.
Disney expects to cut overall film and TV spending by $1 billion to $32 billion in fiscal 2022.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -10.38% due to these changes.
VGM Scores
At this time, Disney has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Disney has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Why Is Disney (DIS) Down 1% Since Last Earnings Report?
It has been about a month since the last earnings report for Walt Disney (DIS - Free Report) . Shares have lost about 1% 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 drivers.
Disney Q2 Earnings Miss Estimates, Revenues Jump Y/Y
The Walt Disney Company reported second-quarter fiscal 2022 adjusted earnings of $1.08 per share which missed the Zacks Consensus Estimate by 10%. The figure however increased 36.7% from the year-ago quarter.
Revenues increased 23% year over year to $19.24 billion but missed the consensus mark by 4.96%. Revenues took a $1 billion hit from the early termination of a film and TV licensing agreement so that Disney could use the programming on its streaming services.
Segment Details
Media and Entertainment Distribution (70.8% of revenues) revenues increased 9.5% year over year to $13.62 billion.
Revenues from Linear Networks increased 5.5% year over year to $7.11 billion. Direct-to-Consumer revenues rose 22.6% year over year to $4.9 billion. Content Sales/Licensing and Other revenues declined 2.6% year over year to $1.86 billion.
Parks, Experiences and Products revenues (34.6% of revenues) surged 109.6% year over year to $6.65 billion.
Domestic revenues were $4.89 billion, significantly up from $1.73 billion reported in the year-ago quarter. International revenues increased significantly from the year-ago quarter’s $262 million to $574 million in the reported quarter.
Revenues from Consumer Products inched up 0.3% year over year to $1.18 billion.
Subscriber Details: Disney+
ESPN+ had 22.3 million paid subscribers at the end of the fiscal second quarter compared with 13.8 million at the end of the year-ago quarter.
Disney+, as of Apr 2, 2022, had 137.7 million paid subscribers compared with 103.6 million as of Apr 2, 2021. The figure was better than the Zacks Consensus Estimate for paid subscribers of 135.2 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 first-quarter 2022. Netflix lost 0.20 million paid subscribers globally against the addition of 3.98 million in the year-ago quarter, missing its guidance of 2.5 million paid-subscriber additions.
Comcast’s Peacock ended the first quarter of 2022 with 28 million monthly active accounts, up from 24.5 million Comcast reported for the platform at the end of 2021.
AT&T’s HBO Max continued to gain from its increasing subscriber base. In first-quarter 2022, subscription revenues improved 4.4% to $3,997 million due to higher HBO Max and HBO subscribers (up 12.8 million year over year).
Meanwhile, Disney’s Hulu ended the quarter with 45.6 million paid subscribers, up from 41.6 million reported in the year-ago quarter.
The average monthly revenue per paid subscriber for ESPN+ increased 4% year over year to $4.73 due to an increase in retail pricing.
The average monthly revenue per paid subscriber for Disney+ was $4.35, up 9% year over year.
The average monthly revenue per paid subscriber for Disney’s Hulu SVOD-only service increased 6% year over year to $12.77 due to an increase in retail pricing and, to a lesser extent, higher per-subscriber advertising revenue.
The average monthly revenue per paid subscriber for Disney’s Hulu Live TV + SVOD service rose 8% from the year-ago quarter to $88.77, owing to higher advertising revenues per subscriber and an increase in retail pricing.
Operating Details
Costs & expenses increased 24.6% year over year to $17.64 billion in the reported quarter.
Segmental operating income was $3.69 billion, up 50.1% from the year-ago quarter.
Media and Entertainment Distribution’s segmental operating income declined 32.3% year over year to $1.94 billion. Linear Networks’ operating income decreased 1.2% to $2.81 billion.
Direct-to-Consumer operating loss was $887 million, wider than the year-ago quarter’s loss of $290 million. The increase in operating loss was due to higher losses at Disney+ and ESPN+ and lower operating income at Hulu.
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 income was $16 million compared with operating income of $312 million reported in the year-ago quarter.
Parks, Experiences and Products’ operating income was $1.75 billion against the year-ago quarter’s operating loss of $406 million.
The Domestic segment reported an income of $1.38 billion against a loss of $587 million reported in the year-ago quarter. International segment reported a loss of $268 million, which was narrower than the reported loss of $380 million in the year-ago quarter.
Consumer Products’ operating profit increased 13.7% year over year to $638 million.
Further, interest expenses increased 10.9% year over year to $355 million.
Balance Sheet
As of Apr 2, 2022, cash and cash equivalents were $13.27 billion compared with $14.44 billion as of Jan 1, 2022.
Total borrowings were $46.6 billion as of Apr 2, 2022, compared with $54.1 billion as of Jan 1, 2022.
Free cash flow was $686 million in the reported quarter compared with free cash outflow of $1.19 billion in the previous quarter.
Outlook
For third-quarter fiscal 2022, Disney expects continued investments in content, which will drive up programming and production costs at Media and Entertainment Distribution.
However, per the company, closures of theme parks in Asia due to COVID-19 could reduce operating income by up to $350 million in the fiscal third quarter.
Disney expects to cut overall film and TV spending by $1 billion to $32 billion in fiscal 2022.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -10.38% due to these changes.
VGM Scores
At this time, Disney has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Disney has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.