Disney Q2 FY2021 Earnings Report Recap

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Disney (DIS) Financial Results: Analysis

The Walt Disney Company (DIS) reported mixed results in its Q2 FY 2021 earnings report. Adjusted earnings per share (EPS) beat analyst forecasts by a wide margin, rising 31.7% year over year (YOY). The adjusted EPS growth ended a streak of nine consecutive quarters of declining adjusted EPS. Disney's revenue, however, came in below analyst estimates and was down 13.4% compared to the year-ago quarter. It marked the fourth straight quarter of declining revenue. The number of Disney+ subscribers also missed analyst expectations. The company's shares fell more than 4% in after-hours trading. Over the past year, Disney's shares have provided a total return of 73.4%, well above the S&P 500's total return of 45.8%.

Disney+ Subscribers

Despite the miss, the number of Disney+ subscribers rose more than three-fold compared to the year-ago quarter. However, the pace of growth is slowing. Disney+ is a direct-to-consumer video streaming service that Disney first launched in November 2019. It 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 the COVID-19 pandemic, which shut the doors on some of Disney's core businesses, including its theme parks, cruises, and theatrical productions.

The average monthly revenue per paid subscriber that Disney+ generates fell from $5.63 in the year-ago quarter to $3.99. Disney said the decrease was due to the launch of Disney+ Hotstar, which has a lower average monthly revenue per paid subscriber and thus brought down the overall average during the quarter.

DIS Parks, Experiences and Products

Disney reiterated the adverse impact the pandemic was having on its operations, especially its parks, experiences and products segment. Its parks and resorts have been closed or operating at significantly reduced capacity since the second quarter of FY 2020, and cruise ship sailings have been suspended. The parks, experiences and products segment's revenue fell 43.9% YOY and reported an operating loss of $406 million compared to operating income of $756 million in the year-ago quarter.

Disney reopened two of its California-based theme parks at the end of April. But since its fiscal second quarter ended on April 3, any revenues those parks have generated were not included in the current earnings report. However, they will help to boost financial results for fiscal Q3. Currently, the only one of Disney's parks that remains closed to the public is its Paris-based theme park.

Disney Earnings Call Recap

In the company's earnings call, Chief Executive Officer (CEO) Bob Chapek said that new guidance from the Centers for Disease Control and Prevention (CDC) will be a bigger catalyst for growth and theme park attendance. “I think in relatively short order you’re going to see our attendance go up significantly,” Chapek said later. The CDC said hours before Disney's earnings release that fully vaccinated people no longer need to put on a face mask or stay six feet away from other people in most situations, whether outdoors or indoors. As of Thursday, Disney’s Paris-based theme park was the only location that has not reopened to the public.

The company did not offer any forward earnings or revenue guidance in its earnings release. Disney's next earnings report (for Q3 FY 2021) is estimated to be released on Aug. 2, 2021.