Walt Disney Co is set to reveal its first assessment of the damage the coronavirus has wreaked on Disney’s global business when the company releases it quarterly earnings today.
Wall Street will assess the level of damage when chief executive Bob Chapek and executive chairman Bob Iger deliver the company’s fiscal second-quarter financial report on Tuesday afternoon.
Overall, analysts expect Disney to report earnings per share of 89 cents, down 45 percent from $1.61 a year earlier.
The earnings report will be the first outing in front of Wall Street for Chapek – the former parks chief who took on the chief executive job in February just as the pandemic started spreading globally.
Chapek took on the new role as Iger stepped down to become executive chairman.
Executives will face analysts looking for answers on how they plan to navigate out of the unprecedented global crisis.
Disney’s acquisitions spree, which included swallowing much of Rupert Murdoch’s 21st Century Fox last year, turned the company into the world’s most powerful entertainment machine. But that girth has now made it the most vulnerable among media companies during the global pandemic.
Walt Disney Co is set to reveal its first assessment of the damage the coronavirus has wreaked on Disney’s global business when the company releases it quarterly earnings. The company’s theme parks, including California’s Disneyland (above) have remain closed throughout the pandemic
With sports leagues dormant, Disney’s ESPN cable channel has resorted to showing reruns of old games and fringe programming like stone-skipping competitions.
Profit centers such as its theme parks and cruises are either closed or docked.
Its powerful content engine has slowed dramatically as productions are on hiatus and movie theaters stay dark.
‘Disney has a bull’s eye on its back like no other media company,’ Bank of America Merrill Lynch analyst Jessica Reif Ehrlich said.
‘They are impacted greatly.’
Ehrlich on April 6 cut 2020 revenue estimates for Disney by 15 percent to $70.9 billion.
Coronavirus forced Disney to halt a major portion of its businesses, including its theme parks, resorts and entertainment productions.
The company furloughed about 100,000 US employees last month. About 75 percent of the company’s employees work for the parks and products divisions.
Amid the pandemic, Disney has had to adapt to the new reality in several ways.
It provided audiences sheltered at home with early access to The Last Dance, an ESPN documentary series about basketball great Michael Jordan that became an instant hit.
National Football League draft coverage also drew record ratings for ESPN and Disney’s ABC broadcast network.
Among other shifts, Disney moved Pixar movie Onward to video on demand early and put Frozen 2 and Star Wars: The Rise of Skywalker on the Disney+ streaming platform ahead of schedule.
Wall Street will assess the level of damage when chief executive Bob Chapek (right) and executive chairman Bob Iger (left) deliver the company’s fiscal second-quarter financial report on Tuesday afternoon
Ehrlich and many other analysts are optimistic about the company’s long-term future. She is one of 13 analysts who rate Disney shares a ‘buy’.
‘They have incredible brands and it’s extremely well managed,’ Ehrlich said.
When the health crisis subsides and the economy bounces back she said ‘there will be pent-up demand for sports and experiences, theme parks, movies and TV shows.
Among other analysts, five rate Disney a ‘strong buy’ and 10 a ‘hold,’ according to data from Refinitiv.
A bright spot is the Disney+ streaming platform that debuted in November. Disney said on April 8 that the offering had attracted more than 50 million paid subscribers in five months. The service will expand to more countries in 2020.
But Disney is spending heavily to build its digital future. Analysts expect the streaming division, known as direct-to-consumer and international, to report a loss of $861 million. Disney has said the unit will turn a profit by fiscal 2024.
Meanwhile, as some US states lift stay-at-home orders, investors and park fans are watching to see how Walt Disney Co – which makes a third of its revenue from parks, experiences and products – reimagines the ‘happiest place on earth’ for a world altered by the coronavirus.
The high-touch, high-volume, kid-centered nature of the parks, and Disney’s need to prevent damage to a brand synonymous with safety and families, will make reopening difficult, experts said.
Disney’s ability to reopen its parks in Asia, the United States and France will also be a powerful signal about how the world can get back to a semblance of normal as it deals with COVID-19.
As some US states lift stay-at-home orders, investors and park fans are watching to see how Walt Disney Co – which makes a third of its revenue from parks, experiences and products – reimagines the ‘happiest place on earth’
‘This is the greatest challenge that the industry has ever faced,’ said Phil Hettema, founder of The Hettema Group, which designs theme park rides and other experiences.
Disney has not announced any plans to reopen the parks.
In April, UBS downgraded its rating on Disney and lowered its division profit estimates to $500 million in fiscal 2020 and just $200 million in 2021 compared to $6.8 billion in 2019.
Disney parks need to be running at roughly 50% of capacity to be profitable, according to the firm.
Financial analysts have predicted reopen dates for Disney ranging from as early as June to January. Guidelines will be set by governors in California and Florida, where Iger and Walt Disney World Resort President Josh D’Amaro sit on state reopening task forces.
Executive chairman Iger recently said checking guests’ temperature could become routine at Disney park entrances.
Among other plans under consideration, according to a source briefed on Disney’s thinking: Rides like the Space Mountain roller coaster could stagger guests in each ‘rocket’ to enforce social distancing. Guests could be notified via app or another technology when they can go on a ride or in a restaurant to eliminate lines.
Staffers and guests could be required to wear masks. Disney last week began online sales of face masks featuring Mickey Mouse, Baby Yoda and other characters and said up to $1 million in profits would go to charity.
Business and political leaders in Florida, home to Walt Disney World, have floated ideas such as limiting capacity at all theme parks during an initial re-opening phase.
The question that health experts and financial analysts are asking is whether any of these measures will be enough to protect employees, guests or Disney’s bottom line.