Media conglomerate Disney (DIS) is set to report fourth quarter fiscal 2020 earnings results after the closing bell. From its theme parks to studios, every aspect of Disney's business has been under severe pressure due to the coronavirus pandemic.
But will Disney issue guidance in a such a manner that suggests confidence about its near-term future? Heading into this quarter once of the main questions for Disney centered around the company’s willingness to shift its considerable weight towards streaming as the delivery mechanism for its blockbuster movie releases? Last month Dan Loeb, Third Point Capital activist investor, demanded the company to permanently suspend its dividend in order to redirect that capital towards streaming investments.
Coronavirus restrictions have shuttered movie theaters across the country, while disrupting Disney’s movie release schedules. Loeb, meanwhile, believes foregoing the dividend would create several billion of additional capital that Disney can then use to spend on content to better compete with the likes of Netflix (NFLX), which expects to spend some $17 billion on content this year. Essentially, Disney’s streaming business, which is a loss-leader and isn’t expected to turn a profit until 2024, is now seen as the growth catalyst for the stock. Will the company on Wednesday suggest that they plan to invest more in Disney+?
Disney shares have surged so far this week, rising 11% on news of the vaccine. As such, one would think that Monday’s news of the effectiveness of a vaccine drastically improves Disney’s outlook, particularly for its theme parks and resorts business, namely ticket sales and customer traffic. The company’s resorts, hotels, theme parks and cruise ships makes up Disney’s largest business segment, generating some $26 billion in revenue last year, or 32.5% of its consolidated total.
For the three months that ended September, Wall Street analysts expects the Burbank, Calif.-based company to lose 71 cents per share on revenue of $14.2 billion. This compares to the year-ago quarter when earnings came to $1.07 per share on revenue of $19.1 billion. For the full year, earnings are projected to decline 72% year over year to $1.59 per share, while full year revenue of $64.84 billion would decline 7.8% year over year.
The company’s grim revenue and profit outlook are the results of extended business closures, which first began in March when Disney announced that its U.S. theme parks would close due to the pandemic. The company has also pushed out several potential blockbuster films that were due for release during the summer until next year. The company did, however, release Mulan during the quarter on its Disney+ streaming platform. Depending on who you ask, the movie was either a success or a failure. But Disney has yet to release any metrics to say definitely.
Without question, the pandemic has forced more people to stream content at home. Last quarter, Disney mentioned the possibility of releasing movies directly through Disney+ at least in the United States. On Wednesday’s conference call with analysts the company will be asked about streaming revenue and viewership for Mulan. Those metrics will either support of counter Dan Loeb’s demands to put any excess capital towards strengthening the streaming business.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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