Disney (DIS) Defies Analysts by Posting Profit

The Walt Disney Company (DIS) confounded analysts by reporting a profit rather than a loss for the quarter that ended on Jan. 2, 2021, which is the first quarter of the company's fiscal year 2021, beating analysts' estimates handily. Earnings per share (EPS) were 32 cents, smashing the consensus estimate that anticipated a loss of 41 cents, although they were down by 79.1% from $1.53 per share earned in the same period a year earlier. Total revenue was $16.25 billion, beating the consensus estimate of $15.9 billion by 2.2% but representing a decline of 22.2% from the figure of $20.88 billion booked in the same period a year ago. 

Disney+ Leads Robust Streaming Growth

The Disney+ streaming service ended the quarter with 94.9 million paid subscribers, for an increase of 258% from the figure of 26.5 million one year ago. The combined figure for all streaming services owned by Disney – ESPN+, Hulu, and Disney+ – was 146.4 million, up by 131% from 63.5 million a year earlier.

However, for Disney+, the average monthly revenue per paid subscriber dipped by 27.5%, from $5.56 to $4.03. Disney's chief financial officer (CFO), Christine McCarthy, explained on the earnings call that the Disney+ figures now include Disney+ Hotstar, which was launched in India and Indonesia in 2020 and has lower average revenue figures than Disney+ in other markets. Excluding Hotstar, the figure would have been $5.37, she indicated. 

For Disney+, its paid subscriber base of 94.9 million as of Jan. 2, 2021 also was the result of sustained robust growth throughout the most recent quarter. Disney+ had 73.7 million paid subscribers as of Sept. 30, 2020, and 86.8 million as of Dec. 2, 2020. The growth rates from those two points were 28.8% and 9.3%, respectively.

Plunging Parks Revenue and Profit

Disney's Parks, Experiences and Products segment, which includes its cruise ships and tours as well as its retail stores, has been battered by government-ordered closures in response to COVID-19. Moreover, the overall drop in revenue and operating income for the company from the first quarter of fiscal 2020 to the first quarter of fiscal 2021 closely mirrors the sharp declines for this segment.

Revenues dropped by $4.63 billion for Disney as a whole and were down by $3.99 billion for Parks, Experiences and Products. Operating income fell by $2.66 billion in total and by $2.40 billion for Parks, Experiences and Products.

Media and Entertainment Distribution Segment

The other major casualties of COVD-19 were content sales and licensing, which suffered from the absence of any new theatrical film releases in the quarter and limited home entertainment releases. Revenue for this category within Disney's Media and Entertainment Distribution segment was down by $2.21 billion, while its operating income fell by $588 million. 

Total revenue for this segment was down by $636 million, as an increase of $1.48 billion for direct-to-consumer sales was the biggest offset to the drop in content sales and licensing. Operating income for the segment fell by $23 million.

Looking Ahead

Disney CEO Bob Chapek remarked on the earnings call that the outlook for the parks segment is "really going to be determined by the rate of vaccination of the public," which will be a key factor driving its ability to reopen. He noted that Disneyland in California is a vaccination site and that more than 100,000 doses have been administered there. Chapek added that, should Dr. Anthony Fauci of the Centers for Disease Control (CDC) be correct in his recent prediction that COVID-19 vaccines will become widely available in April, this would be a "game changer."