Reports second quarter 2020 earnings on Tuesday, May 5, after closing
Yield forecast: $ 18.05 billion
EPS expectation: $ 0.93
Shareholders of The Walt Disney Co. (NYSE 🙂 now have plenty of reasons to worry. The iconic amusement parks of the Burbank, CA-based company have closed, movie and TV production has ended, and Disney's cruise ships are docked – all due to the COVID-19 pandemic.
That means revenues for fiscal 2020, the second quarter will show an extraordinary slowdown and future guidelines will not carry much weight. According to one estimate, Disney is expected to report when it announces financial results on May 5. Resort and consumer product revenues may decline by $ 500 million or more over the period.
DIS Weekly TTM
With fewer people willing to travel or take their families to crowded places, Disney park visitors – an estimated 83 million visitors last year – could drop by half by 2020, said John Hodulik , a UBS analyst. Earnings at the division may drop to just $ 500 million this year and the next $ 200 million.
"The sustained effects of the Covid-19 outbreak will be felt for a number of years, and the parks segment is unlikely to regain previous profitability thresholds until a vaccine is widely available," Hodulik said in a April 20 report worn by Bloomberg. Last year, the segment accounted for 37% of the company's total revenue worth $ 69.6 billion.
Hurt by this massive damage to its business, Disney stock has fallen 27% this year. They closed at $ 105.50 on Friday, after falling 2.45% on that day. with a credible plan to endure this difficult phase. First, it must demonstrate that it both reduces costs and decreases revenues.
Disney executives have already made pay cuts, and the company has given approximately 100,000 workers, mostly park workers, unpaid leave. Investors may see more cuts to tomorrow's announcement.
In addition to spending cuts, investors will also want to know how Disney plans to reopen its operations in North America once closings have eased.
In an interview last month, Bob Iger, now Disney chairman, told Barron that the company is considering recording guests' temperatures when they enter parks. Florida's Orange County Economic Recovery Task Force has proposed a two-stage plan for visitors to return to theme parks. The first phase would limit the presence to 50% capacity and the second phase would allow 75% capacity once pandemic conditions improve.
These preliminary plans certainly show that it will no longer be normal for the company for some time. Indeed, it is unlikely that Disney will reach its peak of income until there is a vaccine to fight the virus.
A bright spot: Analysts expect a growing number of subscribers to the company's recently launched streaming service, Disney +. The service had more than 50 million subscribers in early April, almost twice as much as Disney reported on February 4, after the service was rolled out in Europe and India.
The company can report a new leap in these numbers, as the work-from-home environment has further increased demand for streaming services.
Bottom Line
Given that amusement parks accounted for nearly 30% of Disney's revenues last year and many of the upcoming movies are now on hold, it's hard to see Disney out of this win recession anytime soon.
That said, Disney is a solid stock with a long history of surviving some of the worst economic downturns. For these reasons, in our opinion, it's worth holding onto this name as the company goes through this tumultuous time.
