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How Are Disney (DIS) ETFs Reacting to Q4 Earnings?

The Walt Disney Company DIS reported relatively disappointing fourth-quarter fiscal 2021 results on Nov 10. Earnings and revenues missed the Zacks Consensus Estimate but compared favorably with the year-ago figures. Shares of Disney declined 7.1% (as of Nov 12), largely due to weaker-than-expected earnings results.

The earnings results might bring certain ETFs under the heat, especially those like iShares Evolved U.S. Media and Entertainment ETF, iShares U.S. Consumer Services ETF and The Communication Services Select Sector SPDR Fund that have the largest allocation to this media and entertainment conglomerate.

Earnings Details

The company’s adjusted earnings of 37 cents per share in the fiscal fourth quarter missed the Zacks Consensus Estimate by 27.4%. However, the metric compares favorably with the loss of 20 cents per share reported in the year-ago quarter. Revenues of $18.53 billion also rose 26% from the year-ago quarter but missed the consensus mark of $18.85 billion.

Accounting for about 70.6% of revenues, Media and Entertainment Distribution revenues were also up 9% year over year to $13.08 billion. Revenues from Linear Networks declined 4% from the prior year to $6.69 billion. Furthermore, Direct-to-Consumer revenues increased 38% year over year to $4.56 billion. Content Sales/Licensing and Other revenues expanded 9% year over year to $2.05 billion.

Also, Parks, Experiences and Products revenues that make up for around 29.4 of revenues climbed 99% year over year to $5.45 billion. Notably, the reopening of the company’s parks and resorts, which remained open for the entire quarter this year, supported revenue and operating income growth.

In the prior-year quarter, Shanghai Disney Resort was open for the entire quarter, whereas The Walt Disney World Resort and Disneyland Paris were open for about 12 weeks. Further, Hong Kong Disneyland Resort was open for roughly four weeks, while Disneyland Resort was closed for the entire quarter. Also, parks and resorts that were open during the period were generally operating at reduced capacities.

Revenues from Consumer Products were down 3% year over year to $1.28 billion. This was due to low royalties earned from the game titles — Marvel's Avengers and Twisted Wonderland.

Disney’s segmental operating income rose from $606 million to $1.59 billion. As of Oct 2, 2021, cash and cash equivalents were $15.96 billion compared with $16.07 billion as of Jul 3, 2021.

Disney+ Subscription Update

Disney+, as of Oct 2, 2021, had 118.1 million paid subscribers, rising 60% from the year-ago quarter. The average monthly revenue per paid subscriber for Disney+ was $4.12, decreasing 9% year over year due to a higher mix of Disney+ Hotstar subscribers in the current quarter than the prior-year quarter.

Guidance

Disney expects Disney+ net additions to be higher in the second half of fiscal 2022 from the first half. Moreover, the company now plans to expand its local content portfolio in Asia, India, Europe and Latin America in fiscal 2022. It expects to incur elevated costs in fiscal 2022 due to expenses associated with new projects such as Star Wars: Galaxy's Edge, Avengers Campus, and the Epcot expansion, and cruise ship expansion.

ETFs in Focus

iShares Evolved U.S. Media and Entertainment ETF IEME

This actively-managed ETF employs data science techniques to identify companies with exposure to the media and entertainment sector. Holding 88 stocks in its basket, Disney occupies the third position with a 4.8% share. The fund accumulated $18.2 million in its asset base and charges 18 basis points (bps) in annual fees. IEME has almost remained flat since Disney’s fourth-quarter fiscal 2021 earnings release.

iShares U.S. Consumer Discretionary ETF IYC

This ETF offers exposure to U.S. companies that distribute food, drugs, general retail items and media by tracking the Russell 1000 Consumer Disc 40 Act 15/22.5 Daily Capped Index. It holds 174 stocks in its basket, with Disney taking the fourth spot at 3.9%. The fund amassed $1.49 billion in its asset base. It charges 41 bps in annual fees from investors. IYC is down 0.3% since the company’s earnings release.

The Communication Services Select Sector SPDR Fund XLC

This ETF offers exposure to the communication services sector of the S&P 500 Index and accumulated $15.09 billion in its asset base. It follows the Communication Services Select Sector Index and holds 27 stocks in its basket, with Disney occupying 4.2% weight. The product charges 12 bps in annual fees. XLC has lost about 0.2% since Disney’s earnings release (read: Can Google ETFs Keep Gaining on Q3 Earnings Optimism?).


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The Walt Disney Company (DIS): Free Stock Analysis Report
 
iShares U.S. Consumer Discretionary ETF (IYC): ETF Research Reports
 
iShares Evolved U.S. Media and Entertainment ETF (IEME): ETF Research Reports
 
Communication Services Select Sector SPDR ETF (XLC): ETF Research Reports
 
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