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Will Disney (DIS) ETFs Shine Post Q4 Earnings Results?

Sweta Jaiswal, FRM
·4 min read

The Walt Disney Company (DIS) reported decent fourth-quarter fiscal 2020 results on Nov 12. Both earnings and revenues beat the respective Zacks Consensus Estimate. Hurt by the coronavirus crisis, the metrics, however, declined year over year. Nevertheless, shares of Disney gained as much as 5.6% in the after-hours trading largely due to investor optimism surrounding the earnings beat (see: all the Consumer Discretionary ETFs here).

Earnings in Focus

The company’s adjusted loss of 20 cents per share in the fiscal fourth quarter surpassed the Zacks Consensus Estimate by 70.6%. However, the loss came against the year-ago quarter’s earnings of $1.07 per share. Revenues of $14.71 billion too declined 23.1% from the year-ago quarter but outpaced the consensus mark by 2.6%.

The pandemic affected segmental operating income by $3.1 billion. Notably, Disney had to keep the Disneyland Resort and its cruise line business closed in the reported quarter. Meanwhile, the company’s re-opened parks and resorts are operated at a lower capacity, thereby negatively impacting its overall performance.

The company’s theatrical distribution was impacted by the coronavirus outbreak as theaters remained closed, both domestically and internationally. No major title was released in the reported quarter.

Disney+ Sees Impressive Subscription Growth

Disney+, which was launched on Nov 12, 2019, added 73.7 million paid subscribers as of Oct 3. The company added more than 16 million users sequentially.

Last November, Disney began offering a bundled subscription package of Disney+, ESPN+ and Hulu, which has a lower average retail price per service compared with the average retail price of each service on a standalone basis. The average monthly revenue per paid subscriber for Disney+ was $4.52.

Guidance

Disney continues to anticipate an adverse impact from the ongoing health crisis in fiscal 2021. For the first quarter of fiscal 2021, the company projects COVID-19 to dent its Parks and Experiences business. Disneyland Resort is expected to remain shut at least through the end of the fiscal first quarter. Disneyland Paris is also currently closed. Capital expenditure for fiscal 2021 is projected to be $500 million higher than roughly $4 billion spent in fiscal 2020.

Commenting on the earnings results and the pandemic, Disney CEO Bob Chapek 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.”

ETFs in Focus

The mixed results may hugely impact the ETFs, especially those that have the largest allocation to this media and entertainment conglomerate.

iShares Evolved U.S. Media and Entertainment ETF IEME

This actively-managed ETF employs data science techniques to identify companies with exposure to the media and entertainment sector. Holding 89 stocks in its basket, Disney occupies the third position with a 5.1% share. The fund accumulated $10.1 million in its asset base and charges 18 bps in annual fees (read: ETFs to Shine as Disney Works on Revamping Streaming Arm).

iShares U.S. Consumer Services ETF IYC

This ETF offers exposure to the U.S. companies that distribute food, drugs, general retail items and media by tracking the Dow Jones U.S. Consumer Services Capped Index. It holds 132 stocks in its basket with Disney taking the sixth spot at 4.4%. The fund amassed $1.14 billion in its asset base. It charges 43 bps in annual fees from investors (read: ETFs to Win From the Netflix, Amazon Q3 Earnings Faceoff).

The Communication Services Select Sector SPDR Fund XLC

This ETF offers exposure to the communication services sector of the S&P 500 Index and accumulated $11.39 billion in its asset base. It follows the Communication Services Select Sector Index and holds 26 stocks in its basket with Disney occupying the seventh position at 4.4%. The product charges 13 bps in annual fees (read: Will Google ETFs Keep Shining on Q3 Earnings Optimism?).

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iShares U.S. Consumer Services ETF (IYC): ETF Research Reports
 
iShares Evolved U.S. Media and Entertainment ETF (IEME): ETF Research Reports
 
Communication Services Select Sector SPDR ETF (XLC): ETF Research Reports
 
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