Key Takeaways

  • Analysts estimate adjusted EPS of $0.28 vs. $0.60 in Q2 FY 2020.
  • Disney+ subscribers are expected to more than triple YOY.
  • Revenue is expected to decline, though at a slower pace, amid the ongoing COVID-19 pandemic.

The Walt Disney Co. (DIS) recently announced the openings of its original Disneyland Park as well as its Disney California Adventure Park, positive signs for investors given that both operations were closed more than a year ago due to the COVID-19 pandemic. But the company continues to face major challenges even as the U.S. economy is slowly opening up again. Disney's cruise sailings, popular with consumers, remain suspended. And the company announced in early March the shuttering of 60 Disney retail stores in North America to focus on e-commerce, a recognition of the pandemic-induced acceleration of the shift towards online shopping.

Investors will be looking for signs that the company's financial results are improving amid these challenges when it reports earnings on May 13, 2021 for Q2 FY 2021. Disney's previous fiscal year (FY) ended Oct. 3, 2020. Analysts expect both adjusted earnings per share (EPS) and revenue to continue to post steep declines, albeit at a slower pace than in recent quarters.

Investors will also be focused on the number of subscribers for Disney+, Disney's direct-to-consumer video streaming service, which the company launched in late 2019 as a centerpiece of its future growth strategy. Disney has posted rapid subscriber growth as its parks and cruise businesses have faltered during the pandemic. Analysts are expecting the number of subscribers for Disney+ to continue to rise at a fast pace, albeit slightly slower than in the previous quarter.

Shares of Disney have outperformed the broader market over the past year. The stock's performance gap with the rest of the market began to widen in early November as optimism about vaccine rollouts and a recovering economy boosted investor confidence. The stock surged to a record high in early March but has retreated somewhat since then. Disney's shares have provided a total return of 75.1% over the past year, well above the S&P 500's total return of 46.9%.

One Year Total Return for S&P 500 and Disney
Source: TradingView.

Disney Earnings History

Disney's stock initially fell following its Q1 FY 2021 earnings report, despite beating analysts' expectations. But it began to rise again a week later. Adjusted EPS for the quarter was down 79.4% from the year-ago quarter, but the decline was not as steep as analysts had expected. Revenue fell 22.2%, marking the third consecutive quarter of revenue declines. Disney said that its financial results were adversely impacted by the pandemic, especially its theme parks and cruises.

In Q4 FY 2020, Disney posted its first quarterly adjusted loss per share in at least four years. Revenue for the quarter fell 23.0% compared to the same three-month period a year ago. It was the second straight quarter of falling revenue following Q3's decline of 41.9%. Disney's financial results were adversely impacted by the pandemic. The company said that, since the second quarter of FY 2020, its parks and resorts had been closed or operating at significantly reduced capacity and that its cruise ship sailings had been suspended.

Analysts expect Disney's earnings and revenue to continue their declines in Q2 FY 2021, albeit at a slower pace. EPS is forecast to fall 53.6%, which would mark the tenth consecutive quarter of declining earnings. Revenue is expected to fall 12.1%, which would be the fourth straight quarter of falling revenue. For full-year FY 2021, analysts forecast that annual adjusted EPS will fall 3.4%, which would be a much slower pace of decline than in the previous two years. Revenue is expected to rise 5.2% after falling 6.1% the previous year.

Disney Key Stats
  Estimate for Q2 2021 (FY) Q2 2020 (FY) Q2 2019 (FY)
Adjusted Earnings Per Share ($) 0.28 0.60 1.61
Revenue ($B) 15.9 18.0 14.9
Disney+ Subscribers (M) 108.6 33.5 N/A

Source: Visible Alpha

The Key Metric

As mentioned above, investors will also be focusing on the number of subscribers of Disney+, a video streaming service that Disney first launched in November 2019. Disney+ offers Disney, Pixar, Marvel, Star Wars, and National Geographic branded content in the U.S. and a number of other countries throughout the world. Disney+ still comprises just a small share of Disney's total revenue, but it has grown rapidly in the short time it has been available. That rapid growth has given investors something to be optimistic about during a pandemic that shut the doors on Disney's theme parks, cruises, and theatrical productions.

Since its inception, Disney+ has grown from 26.5 million subscribers at the end of its first full quarter of operation, Q1 FY 2020, to a total of 94.9 million at the end of Q1 FY 2021. On March 9, Disney issued a press release announcing that Disney+ had surpassed the 100-million-subscriber milestone. By comparison, it took streaming rival Netflix Inc. (NFLX) ten years to obtain that many subscribers after launching its streaming service in 2007. Analysts expect a more than three-fold increase in Disney+ subscribers in Q2 FY 2021 compared to the same period a year earlier. If Disney continues that pace of growth, it's likely to meet its goal of reaching 260 million subscribers by 2024.