How Was Disney’s 2021? Here’s Everything We Just Learned.
The calendar may say November, but corporations work differently.
Yes, The Walt Disney Company has already ended its 2021 and started 2022.
Before Disney executives could turn the page on the pandemic, hopefully once and for all, they had to report quarterly and annual earnings.
So, how was Disney’s 2021? About what you’d expect, really. Here’s what we just learned.
The Basics
At its core, Wall Street views earnings reports as little more than gambling exercises.
Investors buy into the stocks they expect to get some play based on projected revenue.
Sometimes, the numbers surpass expectations, as happened with Disney last quarter. On other occasions, a company fails to meet projections.
For the fiscal quarter, Disney didn’t quite match Wall Street’s expectations. Its reported earnings per share (EPS) were $0.37, not the predicted $0.51.
As a reminder, Disney didn’t make those predictions. Third-party analysts did and then held Disney to that standard. Wall Street’s weird.
Anyway, revenue also fell a bit short of Wall Street’s projections. The company earned $18.53 billion, just short of the predicted $18.79 billion.
From Disney’s perspective, its fourth-quarter earnings represent its best totals during the pandemic.
For the fiscal third quarter, I expressed optimism about the $17.02 billion Disney grossed. It did even better this time.
Disney has indisputably survived the brunt of the pandemic and come out stronger on the other side.
Let’s talk about the money to prove this point.
What a Difference a Year Makes
Last year, Disney earned $65.4 billion for its fiscal year, a modest decline from 2019’s $69.6 billion.
For 2021, Disney fell squarely in the middle with $67.4 billion. The company grew a modest three percent. More importantly, it weathered the storm.
Still, the company’s current position demonstrates an eye of the beholder scenario.
On the one hand, Disney’s fiscal fourth-quarter earnings increased 26 percent from 2020’s $14.7 billion.
Conversely, Disney’s cash on hand, one of its financial metrics, has trended down substantially.
The company’s free cash flow was nearly $3.6 billion at this time last year. Now, it’s fallen a shade under $2 billion.
Your favorite business is a bit cash-poor right now. That’s the final lingering impact of the pandemic.
Beyond this consideration, the signs remain quite positive for Disney. During the final fiscal quarter before the pandemic, it earned $20.86 billion.
Obviously, with $18.53 billion, Disney hasn’t fully recovered yet, but it’s already 88 percent of the way back to whole.
Also, the next quarter should be even better as it includes the holiday season and a full complement of Disney cruise line and park operations.
The Disney Streaming Update
I know I’ve bombed you with numbers here. So, let’s talk about the most important but easily understandable ones relative to 2020.
Last year at this time, Disney bragged about its 73.7 million Disney+ subscribers.
While this past quarter featured relatively flat growth, the company gained 2.1 million more customers.
That brings its running total of subscribers to 118.1 million, 44.4 million more than this time last year. Businesses don’t grow 60 percent year over year often.
Somehow, Disney did it twice, though. ESPN+ also increased its subscriber totals 66 percent from 10.3 million to 17.1 million.
Even Hulu+, a mature business, grew 20 percent to 40.8 million. Overall, Disney’s three streaming services claim 179 million subscribers.
What you’ll hear about these numbers is that they’re disappointing because Disney only added five million subscribers for the fiscal quarter.
However, if you’ve read MickeyBlog, you know that Disney had predicted this. In India, annual subscriptions don’t auto-renew.
Instead, users must sign up again. So, that was plenty of subscribers Disney lost almost overnight.
Frankly, I’m impressed that Disney+ added two million subscribers for the quarter.
You’ll read that Disney stock dropped nearly five percent after hours, and the lackluster streaming numbers are the reason why.
We’ll discuss this in more detail tomorrow, but the gist is that executives don’t expect stable growth for Disney+ et al.
Instead, we’ll have stronger quarters and weaker quarters from now on rather than consistent increases.
Content will drive the expansion, with Disney indicating that the July-September portion of 2022 will have the best slate.
About the Parks…
I’ve saved the best for last here. The formerly impervious Disney parks division took on water during the pandemic.
With all parks closed at one point and few fully operational for the body of the year, fiscal 2020 proved nightmarish for Disney.
During the most recent quarter, Disney nearly doubled its parks revenue year over year.
The Disney Parks, Experiences and Products division grossed $5.45 billion compared to $2.733 billion last time.
That’s how much having most parks open impacts the bottom line.
Of course, I’m telling the rosier side of the story by comparing quarters. Year over year, the parks actually suffered a revenue drop.
For fiscal 2020, a third of which didn’t include Coronavirus setbacks, the parks earned $17.038 billion. For 2021, the number fell three percent to $16.552 billion.
That may look bad, but let me be clear. Nobody would have believed you if you had told Disney on January 1st that the numbers would be this close.
During the past six months, parks attained $9.75 billion, nearly 60 percent of the total fiscal year earnings.
In other words, Disney’s parks did roughly 50 percent better during the second half of the fiscal year than the first half.
That’s the overall story of today’s earnings report. It’s been a brutal 18 months, but all the signs hint at a much brighter tomorrow.