Disney (DIS) reported a surprise fiscal Q3 profit late Tuesday and announced “Mulan” will premiere on Disney+ in some markets while revealing a new Star-branded streaming service will launch next year. In extended trading, Disney stock rose.
XDisney Earnings Report
Estimates: Analysts saw a loss of 43 cents per share, reversing Disney earnings of $1.35 per share a year ago. Revenue was seen sliding 38% to $12.65 billion, according to Zacks Investment Research.
Results: Disney earnings came in 8 cents a share while revenue tumbled 42% to $11.78 billion. The parks revenue sank 85% to $1 billion, and the segment saw a $3.5 billion impact on operating income due to the Covid-19 closures. Broadcasst increased 12% to $2.5 billion, and cable revenue fell 10% to $4 billion. CFO Christine McCarthy said ESPN ad revenue should improve in Q4 as the NBA resumed the season.
Direct-to-consumer revenue, which includes streaming services, rose 2% to $3.97 billion.
Movie studio revenue decreased 55% to $1.7 billion. CEO Bob Chapek said “Mulan” will be released on Disney+ in the U.S, Canada, Australia and New Zealand on Sept. 4 for $29.99. It will also be released theatrically in some markets without Disney+.
Chapek said the premiere of “Mulan” via streaming is a one-off and not a new business model but could still be a valuable learning experience. He added that the $29.99 price tag is also meant to recapture some of its investment in an expensive tentpole production.
Disney also plans to launch a Star-branded general entertainment streaming service in 2021, drawing on content from ABC, Fox, FX, 21st Century, Freeform and Searchlight. Chapek said Disney wants to follow the Disney+ model with the packaging of its own content for the new Star-branded streaming service.
Disney streaming services combined had more than 100 million subscribers. As of Aug. 3, Disney+ had 60.5 million, up from 54.5 million in early May. Disney’s prior forecast had seen Disney+ hitting 60 million-90 million subscribers by 2024.
At the end of Q3, Hulu had 35.5 million, up 27% from a year ago, and ESPN+ had 8.5 million, up from 2.4 million a year ago.
Stock: Disney stock rallied 5% to 123.20 in late trading. Shares of the Dow Jones giant gained 0.9% to 117.42 in Tuesday’s stock market trading. Disney stock is forming a flat base with a 127.92 buy point. The base is within a much larger consolidation. Shares have moved sideways since mid-May and over the last week have been hitting resistance at the 50-day average.
Streaming rival Netflix (NFLX) closed up 2.2%, while Amazon (AMZN) climbed 0.9%. Fox (FOXA), which also reports after the bell, added 1.2%. ViacomCBS (VIAC), due Thursday, advanced 3.3%.
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Disney Stock Bright Spot
In the wake of the deadly virus outbreak, Disney reduced capital spending, cut salaries for senior management, and furloughed employees. The company also suspended the semiannual, 88-cent dividend per share of Disney stock, preserving $1.6 billion in cash.
A bright spot is the new Disney+, as people forced to stay home watch more videos online. But even at Disney+, production of new content could be at risk as Covid-19 infections force new shutdowns.
Longer term, Guggenheim Securities analyst Michael Morris has forecast global subscribers will hit 226 million by the end of fiscal 2024.
Meanwhile, Disney’s theme parks, movie studios, media networks and cruise lines have all been battered by the coronavirus pandemic. In Q2, some Disney parks saw limited reopenings after prolonged coronavirus shutdowns while Hong Kong Disneyland reopened only to close again. In the U.S., Disney World and Disneyland reopenings have also hit roadblocks.
Meanwhile, the movie studios segment further delayed the “Mulan,” “Star Wars” and “Avatar” releases as theater screens remain dark due to a resurgence of the deadly virus. In media networks, ESPN has started broadcasting shortened MLB and NBA seasons but the threat of another shutdown still weighs as more teams report infections.
On the plus side, new coronavirus cases are falling in the U.S., notably in California and Florida.
Find Aparna Narayanan on Twitter at@IBD_ANarayanan.
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