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ETFs to Gain on Disney's Strong Earnings

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The Walt Disney Company (DIS - Free Report) reported second-quarter fiscal 2019 results, after close of trading hours on May 8. Investors cheered the earnings and revenue beat by the company (see: all the Consumer Discretionary ETFs here).

Earnings in Focus

Adjusted earnings of $1.61 per share comfortably beat the Zacks Consensus Estimate of $1.59. However, the figure declined 12.5% from the year-ago quarter.

Revenues of $14.92 billion were up 2.5% from the year-ago quarter. The figure surpassed the consensus mark of $14.64 billion. Disney completed the acquisition of 21st Century Fox in the quarter and reported revenues of $373 million for just 11 days from the same. The company also saw strength in the Parks, Experiences and Products and Direct-to-Consumer & International businesses. Per management, Disney has started receiving positive response for its direct-to-consumer strategy. Moreover, the company’s Avengers: Endgame has emerged as the second-highest grossing film ever (read: Avengers Endgame Smashes Box Office Records: Buy Disney ETFs).

Outlook

Disney had earlier warned that fiscal 2019 will be a tough year as the company takes over most of 21st Century Fox Inc. and develops programs for three online video services — ESPN+, Disney+ and Hulu. However, its wide diversification in business is likely to help the company lower any specific restructure-oriented threat to the company.

Market Impact

The stock has a Zacks Rank #4 (Sell) and it comes from a bottom-ranked Zacks industry (bottom 15%). Per CNBC, Disney gained about 1% after reporting the earnings results.

ETFs in Focus

The rally in the company’s stocks will spread into the ETF world, especially funds that have the largest allocation to this media and entertainment conglomerate.

Invesco Dynamic Leisure and Entertainment ETF (PEJ - Free Report)

This fund offers exposure to 29 US leisure and entertainment companies by tracking the Dynamic Leisure and Entertainment Intellidex Index. The Walt Disney is the top firm, making up for 8.23% allocation. The ETF has amassed $64 million in its asset base and charges 63 bps in annual fees. The fund has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: ETFs in Focus After Starbucks' Q2 Earnings Report).

Multifactor Media and Communications ETF (JHCS - Free Report)

This ETF follows the John Hancock Dimensional Media and Communications Index, which targets a wide range of U.S. media and communication stocks to exploit the sector's opportunities. It holds 64 stocks in its basket with DIS taking the top spot at 7.97% share. JHCS has AUM of $23.3 million and charges 40 bps in annual fees.

PowerShares Dynamic Media Portfolio (PBS - Free Report)

PBS seeks to offer capital appreciation by investing in companies that are selected on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value by tracking the Dynamic Media Intellidex Index. This approach results in a basket of 30 stocks, with Disney occupying the top spot at 7.69%. The product has AUM of $87.5 million and an expense ratio of 0.63%. The fund has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: 5 Sector ETFs That Beat the Market in April).

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 92 stocks in its basket, Disney occupies the second position in the basket with 6.6% share. The fund has accumulated $5.5 million in its asset base and charges 18 bps in annual fees (read: Netflix Beats, Guides Lower: ETFs in Focus).

Vanguard Communication Services ETF (VOX - Free Report)

This fund targets the communication sector by tracking the MSCI US Investable Market Communication Services 25/50 Index. Holding 107 stocks in its basket, Disney takes the fourth spot with 5.8% share. VOX has AUM of $2.06 billion and charges 10 bps in annual fees. The fund has a Zacks ETF Rank #1 with a Medium risk outlook (read: ETFs to Soar After Facebook's Solid Q1 Results).

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