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Disney reported mixed results for its second-quarter 2020 earnings after Tuesday’s bell. Shares jumped on news of the report, but fell 1.5% after hours when the company began its conference call, but fell about 3% when executives answered questions. The coronavirus pandemic has disrupted Disney’s theme parks and cruise businesses, but has increased participation in its recently launched streaming service, Disney +.
This is what Disney reported:
- Earnings per share (EPS): 60 cents ex-items
- Income: $ 18.01 billion
Wall Street had been anticipating earnings per share of 89 cents in revenue of $ 17.80 billion, according to Refinitiv consensus estimates. However, it is difficult to compare the reported earnings with analysts’ estimates for Disney’s second quarter, as the pandemic continues to affect global economies and makes the impact of earnings difficult to assess.
This was Bob Chapek’s first earnings call as CEO of Disney, after former CEO Bob Iger announced in February that he would be moving to CEO. Although Iger previously told investors that he would shift his focus to creative projects, Iger was the first to speak about the call from the company’s analysts, although he was absent in the Q&A section. Iger was reportedly called back to daily operations as orders to stay home were accelerated in the US. USA
Disney is suspending its dividend payment for the first half of the fiscal year, Chief Financial Officer Christine McCarthy said in the call. The measure would preserve $ 1.6 billion in cash assuming the dividend was held constant at 88 cents a share, McCarthy said.
The impact of the pandemic was especially pronounced in its Parks, Experiences and Products segment. Disney estimated that the impact on its operating income for that segment was approximately $ 1 billion primarily due to loss of revenue due to closings. The company reported a 58% drop in operating income for the segment this quarter compared to the same period last year.
In the company’s analyst call, Chapek discussed new procedures that Disney would implement in its parks once they reopened, including limiting guest capacity, implementing density control, and health precautions, such as controls temperature and masks. Chapek said the company “is seeing encouraging signs of a gradual return to a certain sense of normalcy in China” and would reopen its Shanghai Disneyland park on May 11 with a gradual approach.
McCarthy confirmed in the call that the company has suspended nearly 100,000 employees as it suffers from closings in its park business.
Chapek said Disney is seeing signs that customers still want to go on their cruises, although that won’t be for several more months at least. He attributed the sentiment to the customer’s trust in the brand.
Here’s how Disney’s segments performed in the quarter in terms of revenue compared to the same quarter last year:
- Media networks: $ 7.26 billion, up 28%
- Parks, Experiences and Products: $ 5.54 billion, 10% less
- Entertainment studio: $ 2.54 billion, 18% more
- Direct to the consumer and international: $ 4.12 billion, more than 100%
Disney saw a bright spot in its direct-to-consumer business. The company reported that as of March 28, it had 33.5 million paid subscribers to its new streaming service, Disney +. In early April, the company said it had exceeded 50 million paid subscribers, as more workers stayed home to slow the spread of the virus. As of May 4, McCarthy said on the call, that number was 54.5 million.
The company continues to implement the service internationally. Despite massive growth, executives declined to give new guidance on the service, even when they think it will be profitable.
Disney’s Hulu had 32.1 million total subscribers as of March 28, 27% more than the previous year.
Disney’s ESPN suffered the loss of live sports content when major sports leagues postponed their seasons. Advertising revenue fell approximately 8% in the quarter, which McCarthy attributed to the loss of live sports content. But McCarthy said there are positive signs of “significant pent-up demand” for sports programming. The NFL draft was the most viewed to date, reaching more than 55 million viewers in three days, and the documentary series “The Last Dance” has also had a record audience, he said.
This story is unfolding. Check back for updates.
Disclosure: Universal Studios theme parks are owned by NBCUniversal, the parent company of CNBC.
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