Disney Needed a Huge Quarter. Did It Get One?
How did Bob Chapek’s day start? Here’s the tweet:
Sources are shooting down a wild H'wood rumor that $DIS director Mark Parker is the company's emergency CEO. Meanwhile, I'm hearing that the Disney board is focused on earnings and operations rather than noise. But why no re-up yet? https://t.co/JdPxygFGZQ via @businessinsider
— Claire Atkinson – Subscribe to The Media Mix (@claireatki) May 11, 2022
Yes, on the day that The Walt Disney Company planned to report its financial earnings for the second quarter of 2022, Business Insider ran this story.
The gist is that Nike executive Mark Parker, a member of Disney’s Board of Directors, may be the shadow CEO in charge.
Jewel Samad/Agence France-Presse, via Afp Via Getty Images
Business Insider actually refutes this premise, but it has gained enough traction that the publication felt the need to report on it.
Meanwhile, DIS stock is trading at its lowest point since April 2020.
So, I’m not exaggerating when I say that Disney needed a huge quarter. Otherwise, Chapek’s future at the company appears bleak.
How were the numbers? Here’s what we just learned.
Photo Credit: AP Photo/Richard Drew, File
About Wall Street’s Expectations
First, let’s remember what happened a year ago at this time.
We were 15 months into the pandemic, and Disney had just released its earnings report for the fiscal second quarter. The company did very well.
The company reported earnings per share of $0.79, a welcome turn of events after the nightmare numbers during the pandemic’s first year.
Also, Disney claimed revenue of $15.61 billion. Oddly, Wall Street took this news as good and bad.
The earnings per share destroyed Wall Street’s expectation of $0.27, but the revenue fell a quarter-billion short of projections.
That’s something odd to understand about this process. The post-earnings stock movement has shockingly little to do with Disney.
Instead, there’s a shell game in place where investors predict numbers. Then, the stock fluctuates up or down, depending on whether it met those goals.
Investopedia had predicted $1.17 in earnings per share and revenue to increase significantly for the current quarter.
Oddly, those aren’t the only two metrics in play here. Disney’s potent parks division has experienced a surge in 2022.
So, evaluators wanted to know precisely how much revenue the Parks, Experience and Products division managed on its own.
However, all this news could be good, and Disney still might face a backlash. How is that possible?
Did you follow the Netflix nonsense? For the first time in a decade, Netflix lost subscribers in a quarter, which only happened due to Russia’s invasion of Ukraine.
Netflix stopped streaming in Russia, which cost them 500,000 subscribers; their overall numbers dropped by 200,000.
That sort of nuance is lost on Wall Street. As a result, the stock fell from a recent high of $348.61 on April 19th to $226.19 on…April 20th. It’s hovering around $166 today.
So, if Disney’s streaming service numbers go down, it’s in a world of hurt.
Disney By the Numbers
The fiscal second quarter of 2022 started on January 2nd, 2022, and lasted through April 2nd, 2022.
Photo: The Walt Disney Company
For this quarter, Disney earned $19.25 billion, an increase of 23.3 percent from last year.
However, that total falls 14 percent short of Wall Street’s estimate of $20.11 billion.
If you’ve read any of my previous writing on this stuff, you know that I think it’s a nonsense comparison.
Image: The Walt Disney Companay
Still, that’s not great news for Disney, especially during a time of tremendous market volatility overall.
Yes, increasing your revenue by 23 percent in a year can somehow sound bad to some folks. It’s weird.
Image: Disney
Anyway, Disney’s earnings per share also slightly missed expectations at $1.08 vs. the previously stated $1.17.
That’s not a big deal in the least. I’d describe it as comfortably within the margins.
Photo: Christian Thompson/Disneyland Resort
Also, I want to stress this point since it may get lost along the line. Disney earned $3.6 billion more than during the same quarter in 2021.
Growth like that is the holy grail for mature companies. In fact, Disney’s statement emphasizes that overall revenue has gained 29 percent.
That’s a comparison of the first six months of fiscal 2021 vs. fiscal 2022.
The report also notes that Disney willingly absorbed a $1 billion hit during this timeframe to strengthen Disney+.
Photo: Chesnot/Getty Images
I presume that’s a reference to Daredevil, Jessica Jones, et al. leaving Netflix for Disney+, but I’m honestly not sure.
Disney Theme Parks and Streaming Numbers
So, I mentioned the two aspects of the business that matter most to Wall Street. Disney crushed both.
Photo: Todaysorlando.com
Disney’s Parks division more than doubled (!!!) its revenue year over year. For fiscal 2021, the parks managed $3.173 billion.
During the past three months, those earnings surged to $6.652 billion. So, folks, Disney theme parks are BACK!
Disney’s park earnings increased from a loss of $406 million last year to a whopping $1.755 billion. That’s a net gain of $2.161 billion.
Once again, the parks are carrying Disney. However, the company still pivoted to a streaming company a while back.
Image: Disney Plus
How is that working out? Well, here’s the only data point that genuinely matters to Disney’s Wall Street profile right now.
Remember how I said that Netflix lost 200,000 subscribers? Friends, Disney gained 7.9 million subscribers. That’s an almost incomprehensible number.
Photo: Shuttershock
Remarkably, that’s only part of the story. Disney’s three-headed streaming service monster, the one including Hulu+ and ESPN+, has reached 205 million subscribers.
As an essential FYI, Netflix’s total is currently at 221.64 million. Three months ago, I mentioned the runway until Disney catches Netflix.
Photo: Chesnot/Getty Images
That runway just shrunk dramatically. As a result, Disney appears poised to overtake Netflix at some point in the next calendar year, possibly even 2022.
That’s a staggering feat. Also, I want to stress that within the industry, nobody expected Disney+ to add that many subscribers.
Photo: Shuttershock
If the service had managed half that, analysts would have been ecstatic.
Honestly, I have no idea what happens next with Disney stock, but the infrastructure in place is stunning.
This earnings report is full of win for Disney and Chapek. But, will it be enough to save his job? Stay tuned.
