Insights

Investors Should Not Overlook Disney’s Theme Park Performance

The Walt Disney Company (NYSE: DIS) is scheduled to report fiscal 2022 second-quarter earnings after the markets close on Wednesday, May 11. The House of Mouse is recovering from the coronavirus pandemic and has a long way to go.
Disney reported earnings per share of $6.64 in 2019, the final year before the outbreak. It reported a loss of $1.58 in 2020 and bounced back to $1.09 in 2021. While many will be focused on developments in its streaming segment, investors should not overlook the theme park segment — it will likely be the key to returning earnings to pre-pandemic levels or higher.

DIS EPS Diluted (TTM) data by YCharts.
Profits may take prominence over subscribers in Disney’s Q2
Ever since the launch of Disney+ in 2019, investors have been acutely watching the growth of Disney’s streaming segment, which also includes Hulu and ESPN+. The attention was only exaggerated during the pandemic when billions of folks were stuck at home and demand for streaming services surged. The pandemic helped propel Disney+ to 130 million subscribers.
Image source: Getty Images.

Investors will be watching closely for subscriber figures in Disney’s upcoming Q2 report because of what rival Netflix (NASDAQ: NFLX) said in its earnings release a few weeks earlier. On April 19, Netflix posted its first-quarter results, which showed it lost 200,000 subscribers. It’s the first such loss in over ten years. Further, it forecasted to lose another two million subs in its Q2. The market will be tuning in to see if Netflix’s headwinds were specific to the company or did the adverse effects spill over to Disney as well.
Nevertheless, those interested in Disney should not overlook the segment that includes theme parks. The business is recovering strongly after having to shut down during the early stages of the pandemic. In its most recent quarter, which ended Jan. 1, Disney’s theme park segment reported revenue of $7.2 billion and operating income of $2.45 billion. The figures put it on pace to eclipse annual figures from 2019 despite still being in the middle of a pandemic and operating with restrictions.
Shareholders will want to see continued momentum for the parks segment. In fiscal 2019, it was accountable for 45.5% of Disney’s overall operating income. After being cooped up at home, the segment could thrive for the next few years with pent-up demand from consumers.
What this could mean for Disney investors
Analysts on Wall Street expect Disney to report revenue of $18.93 billion and earnings per share (EPS) of $1.07. If it hits the EPS estimate, it would almost surpass the EPS figure from all of 2021 ($1.09).

DIS PS Ratio data by YCharts.
Despite the improving business, Disney’s stock is down considerably in 2022. The market is worried that economic reopening hurt demand for its streaming segment. For the most part, that is what has dragged down shares of Netflix. After years of trading at a premium, Netflix and Disney are nearly on par when measured by the price to sales ratio. The comparison highlights just how pessimistic the market has gotten about streaming businesses. For that reason, Disney’s theme park segment could carry more significant importance in the next few quarters. 

Parkev Tatevosian has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy. –

The Walt Disney Company (NYSE: DIS) is scheduled to report fiscal 2022 second-quarter earnings after the markets close on Wednesday, May 11. The House of Mouse is recovering from the coronavirus pandemic and has a long way to go.

Disney reported earnings per share of $6.64 in 2019, the final year before the outbreak. It reported a loss of $1.58 in 2020 and bounced back to $1.09 in 2021. While many will be focused on developments in its streaming segment, investors should not overlook the theme park segment — it will likely be the key to returning earnings to pre-pandemic levels or higher.

DIS EPS Diluted (TTM) data by YCharts.

Profits may take prominence over subscribers in Disney’s Q2

Ever since the launch of Disney+ in 2019, investors have been acutely watching the growth of Disney’s streaming segment, which also includes Hulu and ESPN+. The attention was only exaggerated during the pandemic when billions of folks were stuck at home and demand for streaming services surged. The pandemic helped propel Disney+ to 130 million subscribers.

Image source: Getty Images.

Investors will be watching closely for subscriber figures in Disney’s upcoming Q2 report because of what rival Netflix (NASDAQ: NFLX) said in its earnings release a few weeks earlier. On April 19, Netflix posted its first-quarter results, which showed it lost 200,000 subscribers. It’s the first such loss in over ten years. Further, it forecasted to lose another two million subs in its Q2. The market will be tuning in to see if Netflix’s headwinds were specific to the company or did the adverse effects spill over to Disney as well.

Nevertheless, those interested in Disney should not overlook the segment that includes theme parks. The business is recovering strongly after having to shut down during the early stages of the pandemic. In its most recent quarter, which ended Jan. 1, Disney’s theme park segment reported revenue of $7.2 billion and operating income of $2.45 billion. The figures put it on pace to eclipse annual figures from 2019 despite still being in the middle of a pandemic and operating with restrictions.

Shareholders will want to see continued momentum for the parks segment. In fiscal 2019, it was accountable for 45.5% of Disney’s overall operating income. After being cooped up at home, the segment could thrive for the next few years with pent-up demand from consumers.

What this could mean for Disney investors

Analysts on Wall Street expect Disney to report revenue of $18.93 billion and earnings per share (EPS) of $1.07. If it hits the EPS estimate, it would almost surpass the EPS figure from all of 2021 ($1.09).

DIS PS Ratio data by YCharts.

Despite the improving business, Disney’s stock is down considerably in 2022. The market is worried that economic reopening hurt demand for its streaming segment. For the most part, that is what has dragged down shares of Netflix. After years of trading at a premium, Netflix and Disney are nearly on par when measured by the price to sales ratio. The comparison highlights just how pessimistic the market has gotten about streaming businesses. For that reason, Disney’s theme park segment could carry more significant importance in the next few quarters. 

Parkev Tatevosian has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.

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