Severe Disney Earnings Miss Is About To Ruin The Dow’s Week

May 5, 2020 10:10 PM UTC
Wall Street had a grim forecast for Disney first quarter earnings, but its report fell far short of expectations, sending Dow futures falling.
  • Disney just posted a harrowing earnings miss for quarter one.
  • Its stock fell in after hours trading, along with Dow futures and ETFs.
  • The stunning report could shell shock the Dow the rest of this week.

Disney badly missed Wall Street expectations in its first quarter earnings report.

That is likely to drag down Disney stock (NYSE:DIS) and the Dow Jones after the benchmark rallied Monday and Tuesday.

Disney shares didn’t share in the rally.

Even on Star Wars Day (May the Fourth be with you!), DIS took a 2.08% plunge. Equities analyst MoffettNathanson downgraded Disney stock Monday from “Buy” to “Neutral.”

Shares slid further Tuesday ahead of the Disney earnings report. Markets expected a whole new world of problems to weigh down earnings.

But the first-quarter results were even worse than analysts feared.

Disney Earnings Cratered in Quarter One

Financial market data firm Refinitiv’s consensus estimates projected earnings per share of $0.89 on revenue around $17.8 billion. Instead, The Walt Disney Company earned $0.60/share on $18.01 billion in revenue, a 63% year-over-year decline:

Excluding certain items affecting comparability, diluted EPS for the quarter decreased 63% to $0.60 from $1.61 in the prior-year quarter.

The coronavirus hit Disney especially hard. Closing down theme parks and cruises was a massive hit to the Burbank, California company’s revenue. But Disney also pointed to losses from supply chain disruptions and canceling theatrical releases. They’ve also seen their advertising sales decline as the economy seized up in a recession.

In total, we estimate that the COVID-19 impacts on our current quarter income from continuing operations before income taxes across all of our businesses was as much as $1.4 billion, inclusive of the impact at the Parks, Experiences and Products segment.

Disney’s problems are likely far from over. Disney could be especially hard hit if there is a second wave of coronavirus later this year during the fall and winter months.

Be Prepared for Dow Jones Capitulation

Dow Jones Futures Chart | Source: Investing.com

Dow futures fell after Disney reported earnings Tuesday. The SPDR Dow Jones Industrial Average ETF (DIA) also fell after the earnings report.

SPDR Dow Jones Industrial Average ETF (DIA) | Chart: TradingView

Disney stock also fell 3.38% in after hours trading shortly after earnings were released. It was one of the most active equities Tuesday evening with the fourth highest after hours volume.

Disney stock has had a track record of pushing the Dow up and down with its swings. Not only will the Dow component have a direct impact on the benchmark, but what its earnings signals to investors about the economy will likely affect other Dow 30 stocks.

Disney’s massive earnings miss shows the impacts of coronavirus might be worse than equities reflect, portending a correction this week in order to price in the beleaguered entertainment giant’s woes.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. The author has no position in any of the securities mentioned.

Matt Jackson edited this article for CCN.com. If you see a breach of our Code of Ethics or find a factual, spelling, or grammar error, please contact us.

Last modified: May 5, 2020 10:32 PM UTC

@thehuli

Markets Contributor for CCN living in Nashville, Tennessee. Bachelor of Business Administration from Belmont University in 2009 (majored in Entrepreneurship). Organized Senator Rand Paul's first and second online fundraisers in 2009. Roving editor for the Independent Voter Network since 2013. Email me | Link up with me on LinkedIn | My Website | My Muck Rack Page | Follow Me on Twitter (followed by: fmr Rep. Ron Paul (R-TX), Sen. Rand Paul (R-KY), fmr NM Gov. Gary Johnson, and Rep. Thomas Massie (R-KY))