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Disney will report their first quarter earnings on Tuesday, February 4. The quarterly earnings will be telling about several Disney ventures including Disney+, intellectual property, box office and parks.
One of the biggest influences could be Disney electing to close both Shanghai Disney and Hong Kong Disneyland due to Coronavirus.
According to Market Watch, analysts are predicting adjusted earnings of $1.47 a share, a decline from $1.84 a share a year ago. Analysts on average predict sales of $20.77 billion as of Friday, January 31, according to FactSet which is up from $15.3 billion a year ago. Revenue predictions include $6.97 billion from television, $7.33 billion from the theme parks, $3.41 billion from the movie studios and $3.83 billion from the direct-to-consumer and international segment of the business.
The closures of two international parks, especially during a busy Holiday that Disney had millions of marketing dollars sunk into, Lunar New Year, could prove costly in terms of closing out the first quarter.
The closure has terrible timing with Lunar New Year and spiking tourism numbers expected for the holiday. But, it was important for Disney to set a precedent and to protect those interested in visiting the parks from Coronavirus. The virus has no antidote at this time and on February 3, the World Health Organization announced that the death toll from the disease has now overtaken SARS.
Disney, in all reality, had no choice but to close the parks to protect themselves and guests so whether the closures negatively affect the bottom line is a moot point in the grand scheme of things but for the sake of argument, yes, it will likely negatively impact first quarter and possibly second quarter financials depending on the timeline for containment for the virus.
Disney is not expected to report large attendance gains for domestic theme parks although locals and those who have visited in the last few months may beg to differ. For those who closely monitor Walt Disney World attendance it does seem that there has been a significant spike in attendance.
The virus, which is heavily affecting international travel could negatively affect international attendance at domestic parks in the coming months. Disney Cruise Line, along with other cruise lines has already announced that guests who have traveled through mainland China in the last 14 days will not be allowed to board the ships. In addition, more health screening questions have been added to the pre-cruise questionaire.
Disney Vacation Club members are seeing sparse availability for all of 2020 and rooms went fast for the third and fourth quarters of 2019. Disney is ramping up their game with ads across many of their networks that are high visibility including ESPN and ABC.
The impact of the virus is likely to affect end of Q1 numbers and lead into Q2. Disney shares have fallen over the past two months. Mid-week last week, DIS stock closed right around 10% below its 52 week high.
Despite negatives, Disney is still a strong stock option and even if numbers fall short of previous expectations, Disney stock returned 26% including dividends in the past year, through January 31 market close. That is ahead of the S&P 500’s 24% return, and better than the Dow Jones Industrial Average’s 18% return according to Barron’s.
In addition, compared to media competitors, Disney stock will finish far ahead of entities like AMC Networks, Viacom and Discovery.
Disney is targeting ambitious goals with a high rate of return but also with high risk. Disney reported incredible highs in 2019 and at some point those highs will even out especially with the high output of funds Disney has put forth for acquisitions and IP investment.
To read more about the closures at international parks click HERE!
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(Source: Disney, Market Watch, Yahoo Finance, CNN, CNBC, Barron’s)