Disney reported a second-quarter drop in revenues which rose last year. The coronavirus pandemic has flattened earnings of the company’s most profitable business sectors.
Disney’s stock dropped more than 2% during the after-hours session. The results were carefully watched by Wall Street and compared to the consensus data gather by the Bloomberg market:
Expected earnings per share = 60 cents vs 86 cents expect $1.61 Y/Y
Revenue = $18.01 billion vs $17.68 billion expected $14.92 billion Y/Y
The results reflect the range of the disruptions caused by coronavirus with an outbreak reaching virtually every part of Disney’s operations.
Along with a block on vacation spots around the world, Disney has stopped the release dates for several highly lucrative films during the quarter including the action film “Mulan” and Marvel Cinema’s “Black Widow”, production was put on hold due to social distancing measures staying in place.
According to the company, the impact from COVID-19 and steps taken to prevent its spread are having a huge effect in many ways but most significantly their parks, experiences, and products due to closing their theme parks and retail stores while suspending cruise ships, and guided tours along with supply chain disruptions.
Adding to that, they have delayed, and in some cases, canceled theatrical releases and suspended stage performance at Studio Entertainment. They have watched the impact on advertising sales at Media Networks and Direct-to-Consumer and International.
On a phone call to analysts Last Week, the company during a bid to preserve capital and cut costs will have to forego its semiannual dividend payment which was previously scheduled for July.
It’s believed the move will preserve approximately $1.6 trillion in cash, that’s assuming the dividend has held constant at 88 cents per share. That said, Disney expects to see its capital expenditures down by $400 million over last year for 2020.
Disney’s fiscal second-quarter was made up of the first 3 months of 2020. During that time, the company’s theme parks were closed in Shanghai and Hong Kong, then throughout the world due to the coronavirus becoming worse. These closures contributed to a 58% decline in operating income in Disney’s parks, experiences, and consumer products which have typically been the most profitable for the company.
Disruptions from the coronavirus delivered blows to other sectors of Disney’s media including the studio entertainment. Even though revenue in this area grew approximately 20% over last year to $2.54 billion, operating income dropped 13% to $466 million with the company citing much higher film impairment charges and decreased theatrical distribution as domestic theaters started closing in March.
Disney’s media networks are the brightest with growth on both the top and bottom line during the quarter as strong broadcasting offset weaknesses at ESPN which were harmed with sports programmings amid the pandemic. Segment operating income grew 8.7% to $2.38 billion which comprised of Disney’s total $24 billion in operating income during the quarter.
Disney+, Disney’s streaming service, along with their similar streaming service ESPN+. Each posted double-digit percentage gains in subscribers during the last quarter because consumers were forced to stay home and are now living on digital content. ESPN+ gained subscribers by 20% to 79 million while the company revealed that Disney+ has gained $4.5 million subscribers as of May 4, just under 6 months after the service’s U.S. Launch.
Disney’s competitor, Netflix, reported a greater jump than they expected in quarterly subscribers in their earnings report in April. It’s believed the streaming is on the rise as customers are looking for entertainment while having to stay at home.
Disney’s shares were down by 30% for the year through Tuesday’s close but underperforming against the broader market’s 11% decline.