Disney Analyst Highlights Negative Impact Coronavirus Will Have on Disney Earnings
As the world comes to terms with the Coronavirus Pandemic, it has not been a good week for Disney! Recent reports are coming out that suggest that Disney will lose the equivalent of about $350.000 per day in earnings due to the closures of studios, theme parks, cruise lines and more.
According to a recent piece in the Hollywood Reporter that digests the impact these closures will have on the brand overall, Needham analyst Laura Martin reports, “COVID-19 is having a disproportionately negative impact on Disney’s three largest profit centers,”
She added, “As of last night, Disney will close all its theme parks globally; the NCAA, NBA, MLB, MLS and NHL cancelled or postponed their seasons and ESPN is the largest aggregator of sports programming; and many film openings (including Disney’s Mulan) are postponed, which adds competition upon ultimate release and writes off marketing spending to date.”
So its easy to see the Disney is getting seemingly hit from all sides. And this means, according to Martin that it is “unlikely that COVID-19 worries dissipate by April 1, so we lower estimates for the second calendar year quarter of 2020 for Disney.
In answer to the question of whether Disney is able to re-coup on this investment with theme park visitors and sports goers moving plans until later in the year Martin doesn’t see this as a likey outcome. She added, “Further, we do not believe that lost demand is moved to later periods because: Disney parks operate at near capacity levels normally, sports seasons end; and postponed films face tougher competition and require more marketing spending.”
With this in mind, Martin lowered her estimates of 2nd quarter revenue for Disney by 7.6% to $19.7 billion and her earnings per share estimate by 14% to $1.20.
For Disney Parks, Experience and Consumer Products, Martin reduced 2nd quarter earnings by 14% to $1.63 billion and her fiscal year estimates by 4% to $6.8 billion. (For those wondering, the fiscal year ends in September.)
It doesn’t look much better for Disney’s cable networks despite the fact that guests are expected to be tuning in more. Martin reduced second-quarter earnings by 10% to $1.38 billion and fiscal year by 6% to $5.36 billion. On the want hand, Disney Sports networks have postponed seasons and cancelled games. Not only that but there are many hours of programming gaps that now need to be filled.
For filmed entertainment estimates aren’t any better. If you’ve been following along with MickeyBlog then you know that Disney made the decision to pull Mulan’s debut. We also announced today that Disney has suspended production on several projects including The Falcon and The Winter Soldier, The Little Mermaid, Shrink, Peter Pan and Wendy and more. With that in mind, Martin cut her filmed entertainment unit earnings estimate for the June quarter by 11% to $613 million and her full-year estimate by 2% to $3.13 billion.
As reported in comicbook.com, S&P Global Ratings analyst Naveen Sarma also weighed in on the financial impact of the virus on Disney. “The global coronavirus pandemic continues to expand within the U.S., leading to live event suspensions and cancellations, and government-imposed bans on travel and public gatherings,” he wrote. “This will have a negative effect on sporting events, concerts, theatrical events and film releases.”
Said Sarma: “While we are uncertain as to the long-term economic impact of this pandemic, we believe there is increased risk to our 2020 forecast for Burbank, Calif.-based The Walt Disney Co. and for the company’s ability to reduce leverage to the 2.5x threshold [by the end of fiscal year 2021 that] we have for Disney to maintain its ‘A’ issuer credit rating. While we are affirming our ‘A’ issuer credit ratings, as a result of this increased uncertainty, we are revising our outlook on Disney to negative from stable.”
This is a story that we will continue to monitor closely here at MickeyBlog so keep following along for the latest news and updates!
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