Did Disney+ Growth Save Walt Disney's Earnings Report?

Earnings season may be coming to an end, but there are still many important companies reporting how their quarter went. The Walt Disney Company (NYSE: DIS) reported quarterly earnings of -$0.20 per share (EPS) on an adjusted basis and its posted -$0.39 EPS on continuing operations on $14.7 billion in revenues.

Refinitiv had its consensus estimates calling for a loss at -$0.71 per share on an adjusted basis. Analysts were calling for a more than 25% revenue decline to $14.2 billion for the quarter.

Disney’s parks and resorts have been closed or have been operating at significantly reduced capacity. Its cruise sailings have been suspended. While theme park attendance had been light, the major movies were not in theaters and the Mulan film was released for rental inside the Disney+ streaming service. Disney is still awaiting news of when it can reopen its Disneyland theme park in California, but the sharp rise in COVID-19 cases has likely pushed that out even further.

Similar to many large companies grappling with the pandemic, Disney has engaged in a restructuring that will take it to more of a consumer focused company. It is very possible that Disney Studios may choose to use the Disney+ services as the mechanism for dropping movies instead of or in conjunction with public movie viewing whenever that is safely able to return.

Disney’s direct to consumer and international business had $4.85 billion in revenues in the quarter, followed by $2.85 billion from its parks, experiences and consumer products. Media networks generated $7.21 billion in sales and studio entertainment posted $1.6 billion. Disney+ ended with some 73.7 million paid subscribers.

During the current quarter, Walt Disney recorded charges totaling $393 million due to severance in connection with the reduction-in-force at its parks, experiences and products segment and also from the integration of TFCF.

Bob Chapek, Chief Executive Officer of Walt Disney, said:

Even with the disruption caused by COVID-19, we’ve been able to effectively manage our businesses while also taking bold, deliberate steps to position our company for greater long-term growth. The real bright spot has been our direct-to-consumer business, which is key to the future of our company, and on this anniversary of the launch of Disney+ we’re pleased to report that, as of the end of the fourth quarter, the service had more than 73 million paid subscribers – far surpassing our expectations in just its first year.

One interesting call that was made was that Morgan Stanley had reiterated its Overweight rating and raised its target price to $160 from $135 in that call.

Walt Disney’s stock was down 1.7% at $135.47 as of the closing bell, and it had a $137.96 consensus analyst target price. Disney shares were last seen trading up over 5% at $142.55 in the after-hours.