Disney (DIS) reported second quarter financial results after the bell on Wednesday that missed on both the top and bottom lines, although net additions for its fledging streaming platform Disney+ came in above estimates, causing shares to climb in after-hours trading.
Here are Disney's second quarter results compared to Wall Street's consensus estimates, as compiled by Bloomberg:
- Revenue: $19.25 billion vs. $20.11 billion estimate
- Adj. earnings per share: $1.08 vs. $1.17 estimate
- Disney+ subscribers: 7.9 million vs. 4.5 million expected
After competitor Netflix's (NFLX) big subscriber miss last month (the first time the company had lost subscribers during a quarter in 10 years), analysts were cautiously optimistic when it came to Disney+, although a deceleration compared to previous quarters was expected.
The company added 11.7 million subscribers in the first quarter of 2022, sharply topping analyst estimates. On a year-over-year comparison basis, the media giant reported a net add of 8.7 million in Q2 2021.
The overall subscriber decline comes as inflation remains high, consumers cut costs, and competition intensifies. A lag in content has also been cause for concern.
Still, Disney plans to spend a whopping $11 billion on streaming content this year, as part of its overall $26 billion budget for TV and film production. To compare, Netflix spent $17 billion on content in fiscal year 2021, with plans to hit $18 billion in 2022.
Disney+ has 137.7 million global subscribers to date, above expectations of 134.4 million.
At the end of 2021, the company reiterated its target to bring on 230 million to 260 million subscribers to the service by the end of fiscal 2024. For context, Netflix's subscriber count sits at 221.64 million global subscribers.
Parks, experience and consumer products business
But streaming was not the only focus for Disney.
The entertainment mecca's parks, experience and consumer products business swung to an operating profit of $1.76 billion for the quarter, surpassing expectations of $1.6 billion and just below last quarter's operating profit of $2.5 billion. Revenue for the segment topped $6.7 billion, nearing its pre-pandemic total of $7.6 billion in the final quarter of 2019.
Last quarter, the division saw operating income leap to $2.5 billion versus a loss of $100 million in the same period last year. Furthermore, revenue for the segment, which topped $7.2 billion, neared its pre-pandemic total of $7.6 billion in the final quarter of 2019.
Unlike the shaky streaming side of the business, analysts remain fairly confident that Disney's sprawling theme parks — a consistently important element to the company's bottom line — will see continued robust growth amid the reopening trade. Still, possible headwinds include inflation impact and recession fears.
“Disney’s share price seems to fall daily as fears mount on both [direct-to-consumer] and recession for Parks,” Wells Fargo's Cahall said.
“We think sentiment on both is overdone. While recessionary fears may prove more temporary — and we expect solid Parks results — DTC is a proper Show Me story,” he continued.
On the earnings call, Disney CEO Bob Chapek will likely be forced to address the company's public battle with Florida Governor Ron DeSantis, who revoked the company's special tax district after Disney vowed to fight the Parental Rights in Education Act, or what critics have dubbed the “Don't Say Gay” bill.
The controversial bill, which will go into effect on July 1, states, “Classroom instruction by school personnel or third parties on sexual orientation or gender identity may not occur in kindergarten through grade 3 or in a manner that is not age appropriate or developmentally appropriate for students in accordance with state standards.” Parents will be able to sue districts over violations.
Chapek initially decided not to speak publicly on the matter, opting instead to work behind the scenes in an attempt to soften the legislation. It didn't work.
The executive eventually reversed course following intense backlash over his belated response to the bill. He publicly denounced the act during the company's annual shareholder meeting on March 9, in addition to directly apologizing to employees in a company memo.
Chapek, whose contract expires on February 28, 2023, has dealt with a fair amount of controversy during his tenure. In addition to the DeSantis drama and “Don't Say Gay” fallout, the executive came under further scrutiny following a now-settled breach-of-contract lawsuit with “Black Widow” actress Scarlett Johansson last summer.
Disney has a market cap of just over $196 billion. Its shares have fallen 30% year-to-date.
https://ca.finance.yahoo.com/news/disney-earnings-131255126.html
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