Disney Q2 FY2022 Earnings Report Recap

DIS missed on earnings and on revenue

Key Takeaways

  • Disney's Parks, Experiences and Products revenue beat analysts' estimates, more than doubling year over year.
  • The Parks, Experiences and Products segment has been adversely affected by the COVID-19 pandemic but continues to recover amid vaccine rollouts and the relaxation of restrictions.
  • The number of Disney+ subscribers came in about 2.3 million subscribers above estimates.
  • Disney+ is Disney's video streaming service and has grown rapidly since it first launched in late 2019, but the pace of growth has slowed dramatically.
Disney Earnings Results
Metric Beat/Miss/Match Reported Value Analysts' Prediction
Adjusted EPS Miss $1.08 $1.17
Revenue Miss $19.2B $20.1B
Parks, Experience and Products Revenue Beat  $6.7B $6.4B
Disney+ Subscribers Beat 137.7M 135.4M

Source: Predictions based on analysts' consensus from Visible Alpha

Disney (DIS) Financial Results: Analysis

The Walt Disney Company (DIS) reported Q2 FY 2022 earnings results that missed analysts' consensus estimates. Adjusted earnings per share (EPS) came in below analyst forecasts but were up 36.7% from the year-ago quarter. Disney's revenue also missed expectations, rising 23.3% year over year (YOY). However, revenue for the company's Parks, Experience and Products segment surpassed expectations, as did the total number of Disney+ subscribers.

The company's shares rose more than 3% in extended trading. Over the past year, Disney's shares have provided a total return of -42.1%, well below the S&P 500's total return of -3.6%.

DIS Parks, Experience and Products Revenue

Revenue for Disney's Parks, Experiences and Products segment rose 109.6% compared to the year-ago quarter, marking the fourth straight quarter of growth after five consecutive quarters of declines. The segment comprises Disney's theme parks, resorts, cruise ships, and vacation clubs. It is tied especially closely to the spending power of consumers in the U.S. and around the world.

Of all Disney's business segments, the Parks, Experiences and Products segment has been the most severely affected by the COVID-19 pandemic and related government-imposed measures to limit the spread of the virus. The company was forced to close its theme parks and resorts and suspend cruise ship sailings in response to these developments, only beginning to reopen again at generally reduced capacity in May 2020.

Disney highlighted its strong results for the quarter, specifically mentioning the "fantastic performance" of its domestic parks. The company said that its domestic parks and resorts are generally operating without significant capacity restrictions, such as those that were in place in the previous year due to the pandemic. However, it noted that some of its international parks, resorts, and cruise ship operations continue to be affected by pandemic-related closures as well as capacity and travel restrictions.

Disney+ Subscribers

The number of Disney+ subscribers grew 32.9% compared to the year-ago quarter. It was the slowest YOY pace of growth in subscriptions since Disney first launched the direct-to-consumer video streaming service in November 2019. The streaming service offers Pixar, Marvel, Star Wars, and National Geographic-branded content in the U.S. and a number of other countries throughout the world.

Disney said that subscription revenue for Disney+ grew during the quarter, which was due to both subscriber growth and increases in retail pricing.

Disney+ still comprises just a small share of Disney's total revenue but 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. However, growth has been gradually slowing amid intense competition from other streaming services, such as those offered by Netflix, Inc. (NFLX), Amazon.com, Inc. (AMZN), and Apple Inc. (AAPL).

Disney+ subscription growth was a stark contrast to the subscriber loss that Netflix reported last month. Investors were watching to see if Disney would perform similarly.

Disney's next earnings report (for Q3 FY 2022) is expected to be released on Aug. 10, 2022.

Article Sources
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  8. The Walt Disney Co. "Form 10-K for the Fiscal Year Ended October 2, 2021," Page 9.

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  10. Reuters. "Netflix Rocked by Subscriber Loss, May Offer Cheaper Ad-Supported Plans."

  11. Yahoo! Finance. "Earnings Calendar: DIS."

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