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2020-08-03 10:46

The Walt Disney Company is scheduled to release its earnings report for the fiscal third quarter after the market close on August 4th. Disney’s second quarter concluded on March 28th and saw the impact from the Coronavirus pandemic in the last few weeks of the quarter only.

The third quarter, however, will reflect the full impact of COVID-19 on the company’s financial performance. The health crisis pushed Disney into temporarily suspending activity at the majority of its cash-generating segments in recent months.

In July, the American multinational, however, showed early signs of recovery as its theme parks in Florida, France, and Asia reopened for the public. It also signed an agreement with the NBA and offered support for the Basketball season to be resumed. Disney said that it would host all coaches and NBA players at its Orlando-based facilities. But the Disneyland Park in California is currently indefinitely shut down due to the surge in new state-wide COVID-19 cases.

The pressure, however, has not entirely been lifted from Disney. Several of its cruise lines and themes parks are still closed for the public. The mass media and entertainment conglomerate has also postponed the release of its major theatrical titles indefinitely.

What The Analysts Are Forecasting

The Zacks Consensus Estimate for Disney’s loss per share in the fiscal third quarter was announced at 35 cents in June. But owing to the rising COVID-19 uncertainty, the forecast has now been broadened to 43 cents per share instead. In comparison, the Burbank-headquartered company had printed $1.35 of adjusted earnings per share in the comparable quarter of last year.

In terms of revenue, the consensus suggests $12.7 billion in Q3 that represents a 37.5% decline on a year over year basis. In the past four quarters, Disney’s earnings have topped analysts’ estimates in two but fell shy in the remaining two. The average negative surprise, as per Zacks, stands at 7.9% for the past four quarters.

What Investors Should Look For

In its Q2 earnings report, Disney had highlighted a $1.4 billion worth of impact on its operating income due to COVID-19. Depreciation registered at 21% of Disney’s parks, experiences, and products’ revenue. If the cash outflows are minimized, current operating conditions will turn out to be significantly more manageable for the company.

Investors should also look for how Disney’s media networks business performs in the third quarter that generated more than 50% of its operating income in 2019. On the upside, Disney+ now boasts 54.5 million subscribers. A hefty demand for Disney’s new streaming service and a sharp increase in new sign ups is expected to offset a few of Disney’s losses in Q3.

Disney’s Performance In The Stock Market

Shares of the company tanked more than 0.5% in extended trading on Friday. At $116 per share, the Walt Disney Company is currently more than 20% down year to date in the stock market after recovering from an even lower $86 per share in March when the impact of COVID-19 was at its peak.

Disney’s performance in the stock market was slightly upbeat in 2019 with an annual gain of a little under 10%. At the time of writing, the U.S. company has a market capitalization of $211.22 billion and a price to earnings ratio of 39.46.