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ETFs to Gain on Disney's Q1 Earnings & Solid Subscriber Growth

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The Walt Disney Company (DIS - Free Report) reported mixed first-quarter fiscal 2020 results, after close of trading hours on Feb 4. Earnings topped estimates while revenues missed the same. However, due to the mixed results, shares of Disney have lost as much as 2.3% since the earnings release (see: all the Consumer Discretionary ETFs here).

Earnings in Focus

Adjusted earnings of $1.53 per share comfortably beat the Zacks Consensus Estimate by 7%. However, the figure declined 16.8% from the year-ago quarter. Revenues of $20.89 billion were up 36.3% from the year-ago quarter. The figure missed the consensus mark by 1.1%. The year-over-year growth was largely on the back of solid top-line performance across all segments, particularly the Studio Entertainment and Direct-to-Consumer (DTC) businesses. Meanwhile, higher operating losses in the DTC segment and Media Networks’ operating income decline hurt profitability.

Disney+ Sees Roaring Subscription Growth

In November 2019, the company began offering a bundled subscription package of Disney+, ESPN+ and Hulu, which has a lower average retail price per service compared to the average retail price of each service on a standalone basis. Notably, by the end of the fiscal first quarter, the Disney+ streaming service had 26.5 million paid subscribers and 28.6 million subscribers as of Feb 3. The subscription growth in the quarter outpaced analysts’ expectations (read: ETFs to Make the Most of Disney+ Growth Story).

Notably, Disney is set to launch Disney+ in India through the Hotstar service on Mar 29. The company will launch Disney+ in several international markets, starting with Western Europe on Mar 24.

Coronavirus to Affect Q2 Numbers

Disney expects second-quarter fiscal 2020 operating income to be negatively impacted by park closure at Shanghai and Hong Kong due to coronavirus. While the Shanghai closure is expected to hurt operating income by $135 million, Hong Kong’s closure will result in a negative impact of roughly $145 million (read: Best & Worst ETFs of Coronavirus-Affected January).

ETFs in Focus

The mixed results could have a huge impact on ETFs, especially funds that have the largest allocation to this media and entertainment conglomerate.

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 58 stocks in its basket with DIS taking the third spot at 5.84% share. JHCS has AUM of $23.1 million and charges 40 bps in annual fees. The fund has lost around 0.3% since Disney’s earnings release (read: Frozen 2 Sets Box Office Record: ETFs to Surge).

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 88 stocks in its basket, Disney occupies the second position in the basket with 6% share. The fund has accumulated $6.9 million in its asset base and charges 18 bps in annual fees. The fund has gained around 0.1% since the earnings release (read: ETFs in Focus on Netflix's Solid Q4 But Weak Outlook).

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

This ETF offers exposure to U.S. companies that distribute food, drugs, general retail items and media by tracking the Dow Jones U.S. Consumer Services Capped Index. It holds 156 stocks in its basket, with Disney taking the second spot at 7.3%. The fund has amassed $926.7 million in its asset base. It charges 42 bps in annual fees from investors. The fund has gained around 0.6% since the earnings release (read: Sector ETFs to Watch Out for Until Phase-2 Trade Deal).

Communication Services Select Sector SPDR (XLC - Free Report)

This ETF offers exposure to the communication services sector of the S&P 500 Index and has accumulated $7.2 billion in its asset base. It follows the Communication Services Select Sector Index and holds 26 stocks in its basket, with Disney occupying the eight position at 4.23%. The product charges 13 bps in annual fees. The fund has gained around 0.2% since the earnings release (read: Google ETFs Gain Despite Mixed earnings).

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