Disney (DIS), the media and entertainment giant, is scheduled to release its fiscal third-quarter earnings on Wednesday, August 9, after the market closes. Analysts expect the company to report earnings of $0.98 per share, down from $1.09 per share a year ago, on revenue of $22.4 billion, up from $21.5 billion a year ago.
Disney’s Recovery from Covid-19: A Mixed Picture
Disney’s earnings will reflect the company’s recovery from the Covid-19 pandemic, which severely impacted its business segments in 2020 and early 2021. The company’s theme parks, resorts, cruise lines, and movie theaters were either closed or operated at limited capacity due to lockdowns and social distancing measures. The company’s media networks and streaming services also faced lower advertising revenue and higher content costs due to production delays and disruptions.
However, the company has seen some signs of improvement in its business segments in recent months, as more venues reopened or increased capacity amid the easing of Covid-19 restrictions. The company’s theme parks, especially in the U.S., have seen higher attendance and spending from guests who are eager to return to the magic of Disney. The company’s movie studios have also resumed releasing films in theaters and on its streaming platforms, such as Black Widow and Jungle Cruise.
The company’s media networks and streaming services have also continued to generate revenue and attract viewers with their diverse and quality content offerings. The company’s flagship streaming service, Disney+, has reached over 157 million paid subscribers worldwide as of April 3, up from 103.6 million a year ago. The company’s other streaming services, such as Hulu and ESPN+, have also seen strong growth in subscribers and revenue.
Disney’s Challenges in Streaming: A Competitive Landscape
Disney’s earnings will also reveal the company’s challenges in its streaming business, which is facing increased competition and slowing growth in some markets. The company’s streaming services have to compete with other established and emerging players in the industry, such as Netflix, Amazon Prime Video, HBO Max, Peacock, Paramount+, and Discovery+.
The company’s streaming services have also seen some headwinds in their subscriber growth and retention rates in some markets, due to various factors such as price hikes, content availability, customer satisfaction, and piracy. For example, Disney+ lost about 2 million subscribers in India after it stopped streaming the popular Indian Premier League cricket matches due to Covid-19. The service also faced backlash from some customers who were unhappy with the $30 premium access fee for Black Widow on top of their monthly subscription fee.
The company’s streaming services have also faced higher content and marketing costs as they invest in producing and acquiring more original and exclusive content to differentiate themselves from their rivals. The company has also expanded its streaming services to more international markets, such as Latin America, Europe, Asia, and Africa, which require more localization and customization of content and pricing.
Disney’s Outlook: A Cautious Guidance
Disney did not provide a formal guidance for its fiscal third-quarter earnings, citing the uncertainty and volatility in the market. However, analysts expect the company to provide some indications of its performance and expectations for its business segments in the next quarter.
Analysts expect the company’s revenue to grow by single digits year-over-year in the fourth quarter of 2023, compared to a 23% growth in the same quarter a year ago. They also expect the company’s earnings per share to decline by double digits year-over-year in the fourth quarter, compared to a 32% increase in the same quarter a year ago.
Analysts expect the company’s theme parks segment to continue to recover from Covid-19 impacts, as more venues reopen or increase capacity around the world. However, they also expect the segment to face some challenges such as labor shortages, rising costs, lower international visitation, and potential Covid-19 resurgences.
Analysts expect the company’s media networks segment to see a slight increase in revenue, driven by higher affiliate fees and advertising sales. However, they also expect the segment to face some challenges such as cord-cutting, lower licensing revenue, higher programming costs, and lower ratings.
Analysts expect the company’s studio entertainment segment to see a decline in revenue, as theatrical releases remain limited or delayed due to Covid-19. However, they also expect the segment to benefit from higher home entertainment and streaming revenue from titles such as Shang-Chi and the Legend of the Ten Rings and Free Guy.
Analysts expect the company’s direct-to-consumer segment to see a strong growth in revenue, driven by higher subscriber numbers and average revenue per user. However, they also expect the segment to face higher content and marketing costs, as well as increased competition from rivals.
