Disney Q4 FY2021 Earnings Report Preview: What to Look for

Focus on DIS Parks, Experience and Products segment revenue

Key Takeaways

  • Analysts estimate adjusted EPS of $0.44 vs. -$0.19 in Q4 FY 2020.
  • Revenue for the Parks, Experience and Products segment is expected to rise YOY for the second straight quarter.
  • Revenue is expected to increase for the second straight quarter after four consecutive quarters of declining revenue amid the COVID-19 pandemic.

During the pandemic, The Walt Disney Co. (DIS) has successfully fueled the meteoric growth of Disney+, its direct-to-consumer video streaming service, as millions of people have sheltered and worked at home. Launched in 2019, the service passed 100 million subscribers earlier this year, a major milestone. That torrid growth came amid the closure of its legacy theme parks and resorts, and the suspension of cruise ship sailings amid the pandemic. But the growth of Disney+ is now slowing as the company's traditional resorts and cruise ship operations begin to recover.

Investors will look at how these trends are affecting Disney's current rebound from the worst of the pandemic when the company reports earnings on Nov. 10, 2021 for Q4 FY 2021. The company's fiscal year ended on Oct. 2. Analysts expect Disney to post positive adjusted earnings per share (EPS) compared to a loss per share in the year-ago quarter. Revenue is expected to rebound at a healthy pace for the second quarter in a row.

Investors will also be focusing on revenue in Disney's Parks, Experience and Products segment, which was hit hard by the pandemic as the company shuttered its theme parks and cruise operations. The relaxing of government restrictions and lifting of capacity limits is helping the business to rebound. Analysts expect the segment's revenue to rise for the second straight quarter following five consecutive quarter of declines.

Shares of Disney have underperformed the broader market over the past year. The stock had mostly outperformed from late November 2020 until around mid-July 2021. It then managed to keep pace with the market through early October, but has been lagging since then. Disney's shares have provided a total return of 24.0% over the past year, below the S&P 500's total return of 32.4%.

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

Disney Earnings History

Disney reported Q3 FY 2021 earnings and revenue that beat analysts' expectations. Adjusted EPS rose more than tenfold compared to the year-ago quarter. It marked the second straight quarter of rising adjusted EPS after nine straight quarters of declines. Revenue grew 44.5% year over year (YOY), marking the first growth since the second quarter of FY 2020. Disney said that its theme parks and resorts had resumed operations, although generally at reduced capacity. The company also said that its cruise ship sailings and guided tours were gradually returning to service. Disney said, however, that it was still facing challenges related to the pandemic.

In Q2 FY 2021, Disney reported earnings that beat expectations while revenue came in below estimates. Adjusted EPS increased 26.4% compared to the year-ago quarter, ending the streak of nine straight quarters of declines. Revenue fell 13.4% YOY, marking the fourth straight quarter of declining revenue. Disney said that it was beginning to see signs of recovery despite the fact that many of its parks and resorts remained closed or at reduced capacity.

Analysts expect Disney's improvement to continue in Q4 FY 2021. They estimate positive adjusted EPS for the quarter compared to an adjusted loss per share in the year-ago quarter, which was the first such loss in at least 15 quarters. Revenue is expected to grow 27.7% YOY, which would be the second straight quarter of revenue growth. For full-year FY 2021, analysts expect adjusted EPS to rise 11.6%, which would end a two-year streak of declines. Annual revenue is expected to grow 3.5%, a welcome improvement after last year's 6.1% decline.

Disney Key Stats
  Estimate for Q4 FY 2021 Q4 FY 2020 Q4 FY 2019
Adjusted Earnings Per Share ($)   0.44 -0.19 1.07
Revenue ($B) 18.8 14.7 19.1
Parks, Experience and Products Revenue ($B) 5.4 2.7 6.8


Source: Visible Alpha

The Key Metric

As mentioned, investors will also be focusing on Disney's revenue from the Parks, Experience and Products segment. This segment is comprised of Disney's theme parks, resorts, cruise ships, and vacation clubs and is tied especially closely to the spending power of consumers in the U.S. and around the world. The Parks, Experience and Products segment was badly impacted by the pandemic and related government-imposed measures to limit the spread of the virus. But it has begun to recover from the worst of the pandemic, thanks to vaccine rollouts and the relaxation of restrictions that have allowed Disney to increase capacity limits at its theme parks.

Prior to the pandemic, Disney's Parks, Experience and Products segment posted annual revenue of $26.8 billion in FY 2019. That revenue sank 36.4% in FY 2020 as the company was forced to close its theme parks and resorts and suspend cruise ship sailings amid the pandemic. Revenue for the segment continued to decline through the first two quarters of FY 2021, falling 52.7% YOY in Q1 and 43.9% YOY in Q2. The segment finally rebounded in Q3 FY 2021 with revenue rising 307.6% YOY amid vaccine rollouts and relaxation of restrictions. Analysts expect revenue for the Parks, Experience and Products segment to increase 96.1% YOY in Q4 FY 2021. For full-year FY 2021, analysts expect the segment's revenue to fall 3.4% to $16.5 billion, still well below the amount of revenue it was generating prior to the pandemic.

Article Sources

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  2. Reuters. "Disney offers streaming service discount for a month to boost subscribers." Accessed Nov. 8, 2021.

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