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Disney, Beyond Meat earnings, ISM non-manufacturing: What to know in markets Tuesday

Heidi Chung
Reporter

In a busy day, the U.S. services sector data and earnings from media giant Disney (DIS) and plant-based protein maker Beyond Meat (BYND) will be in focus Tuesday.

Shortly after market open, the Institute for Supply Management will release its April non-manufacturing index report. Economists expect a steep decline to 37.8 during the month from 52.5 in March.

“Social distancing measures and closures of non-essential businesses increased in severity since mid-March. The impact of these measures likely weighed on the non-manufacturing sector more heavily in April. We expect further declines in the new orders and business activity indices of this survey,” Nomura economist Lewis Alexander wrote in a note to clients May 1. “However, disruptions to supply delays due to the COVID-19 outbreak may continue to push up the supplier delivery index, partly offsetting declines in other subindices.”

Meanwhile, on the earnings front, both Disney and Beyond Meat will delivery quarterly results after market close.

An employee cleans the grounds behind the closed gates of Disneyland Park on the first day of the closure of Disneyland and Disney California Adventure theme parks as fear of the spread of coronavirus continue, in Anaheim, California, on March 14, 2020. (Photo by DAVID MCNEW / AFP) (Photo by DAVID MCNEW/AFP via Getty Images)

Media behemoth Disney is expected to report adjusted earnings of 86 cents per share on $17.68 billion in revenue during its fiscal second quarter, according to data compiled by Bloomberg.

Due to the COVID-19 pandemic, Disney theme parks around the world have shut their doors. Given the challenges that Disney Parks, ESPN and the film and production division have faced recently, long-time bull Michael Nathanson of MoffettNathanson, slashed his price target and downgraded Disney stock Monday ahead of the company’s earnings report.

“We are downgrading Disney from Buy to Neutral and reducing our price target by -$8 to $112. As economic pressures from COVID-19 become more evident, we expect to see further pressure on earnings, limiting the stock’s performance for the near-to-medium term despite the company’s strong position longer-term,” Nathanson wrote in a note to clients Monday.

“Our Disney downgrade is also an admission that we believe the economic impact on the company will be longer than most anticipate, especially given the risks of a second wave of infections after reopening,” he added.

Nathanson went on to argue that Disney’s core issue was that the company was not well protected from a crisis like COVID-19 and thus will likely take a financial hit in the near to medium term.

Disney stock fell nearly 29% this year, while the broader market sank 11%.

COVID-19 and its impact on business will also be in focus for Beyond Meat when it reports results. Analysts polled by Bloomberg expected the alternative-meat maker to report an adjusted loss of 7 cents per share on $88.16 million in revenue during its first quarter.

Some key questions that JPMorgan analyst Ken Goldman has headed into earnings include how Beyond Meat is faring in the second quarter amid the pandemic, to what extent has COVID-19 impacted new launches and restaurant partnerships, and how has the company been able to offset domestic challenges with improved sales internationally.

Foodservices partnerships account for more than half of total sales for Beyond Meat so with restaurants essentially shut down in the U.S., commentary from management regarding the issues will be closely monitored.

Beyond Meat stock has been faring well amid COVID-19. Shares rose 25% in 2020 and have outperformed the broader market’s 11% decline during the same time period.

Other notable earnings reports scheduled for Tuesday include Incyte (INCY), Regeneron (REGN), Wayfair (W) before market open; Activision Blizzard (ATVI), Cheesecake Factory (CAKE), Electronic Arts (EA), Mattel (MAT), Pinterest (PINS) after market close.

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Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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