The Walt Disney Company (NYSE:DIS) DIS reported decent second-quarter fiscal 2021 results on May 13. Earnings beat the Zacks Consensus Estimate and rose year over year. However, hurt by the coronavirus crisis, revenues missed the consensus estimate and declined year over year. Shares of Disney declined 2.6% (as of May 14), largely due to weak top-line results.
Earnings Details
The company’s adjusted earnings of 79 cents per share in the fiscal second quarter surpassed the Zacks Consensus Estimate by 172.4%. Moreover, the metric rose 31.7% year over year. Revenues of $15.61 billion also declined 13.4% from the year-ago quarter and missed the consensus mark by 2.6%.
Accounting for about 79.7% of revenues, Media and Entertainment Distribution revenues increased 0.6% year over year to $12.44 billion. Revenues from Linear Networks fell 4% to $6.75 billion. Furthermore, Direct-to-Consumer revenues climbed 59% year over year to $4 billion. Content Sales/Licensing and Other revenues contracted 36.4% year over year to $1.92 billion.
Also, Parks, Experiences and Products revenues that make up for around 20.3% of revenues declined 43.9% year over year to $3.17 billion. Notably, Disneyland Resort, Disneyland Paris and the company’s cruise business were temporarily shut in the second quarter. Hong Kong Disneyland Resort was opened for about 30 days during the period. Meanwhile, both Walt Disney World Resort and Shanghai Disney Resort were open throughout the reported quarter.
Disney’s segmental operating income rose 2.4% year over year to $2.47 billion. As of Apr 3, 2021, cash and cash equivalents were $15.89 billion compared with $17.07 billion as of Jan 2, 2021.
Disney+ Sees Impressive Subscription Growth
Disney+, as of Apr 3, 2021, had 103.6 million paid subscribers compared with 33.5 million as of Mar 28, 2020. The company is on track to achieve its previous guidance of 230-260 million paid subscribers by the end of fiscal 2024.
The average monthly revenue per paid subscriber for Disney+ was $3.99, down 29% year over year.
Guidance
Disney continues to expect an adverse impact from the ongoing health crisis in fiscal 2021. For third-quarter fiscal 2021, Disney expects Linear Networks’ operating income to decline year over year primarily due to higher sports programming and production costs at ESPN. Going on, Disney+ now anticipates fewer net subscriber addition for its direct-to-consumer services in the second half of 2021. Moreover, the company plans to launch STAR+, its stand-alone general entertainment and sports streaming service for Latin America, on Aug 31.
Commenting on the earnings results and the pandemic, Disney CEO Bob Chapek reportedly said, “we’re pleased to see more encouraging signs of recovery across our businesses, and we remain focused on ramping up our operations while also fueling long-term growth for the Company. This is clearly reflected in the reopening of our theme parks and resorts, increased production at our studios, the continued success of our streaming services, and the expansion of our unrivaled portfolio of multiyear sports rights deals for ESPN and ESPN+.”
ETFs in Focus
The mixed results may hugely affect the ETFs, especially those that have the largest allocation to this media and entertainment conglomerate.
iShares Evolved U.S. Media and Entertainment ETF IEME
This actively-managed ETF employs data science techniques to identify companies with exposure to the media and entertainment sector. Holding 88 stocks in its basket, Disney occupies the second position with a 5.1% share. The fund accumulated $20.4 million in its asset base and charges 18 basis points (bps) in annual fees (read: Disney ETFs in Focus Ahead of Q2 Earnings).
iShares U.S. Consumer Services ETF IYC
This ETF offers exposure to U.S. companies that distribute food, drugs, general retail items and media by tracking the Dow Jones U.S. Consumer Services Capped Index. It holds 133 stocks in its basket with Disney taking the second spot at 7%. The fund amassed $1.55 billion in its asset base. It charges 43 bps in annual fees from investors.
The Communication Services Select Sector SPDR Fund XLC
This ETF offers exposure to the communication services sector of the S&P 500 Index and accumulated $13.39 billion in its asset base. It follows the Communication Services Select Sector Index and holds 26 stocks in its basket with Disney occupying 3.9% weight. The product charges 12 bps in annual fees (read: ETFs to Stack as Reopening Poses No Hindrance for Big Tech).
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