Wednesday marked a third day of gains for the Dow Jones Industrial Average (^DJI 0.06%). The Dow was up 1.08% by 11:30 a.m. EST, continuing its recovery from a steep sell-off last Friday. While the death toll from the coronavirus outbreak in China continues to rise, some promising results using drug treatment against the virus may be contributing to the rally.
Two Dow components left out on Wednesday were Walt Disney (DIS -0.45%) and Nike (NKE 0.95%). Disney reported better-than-expected quarterly results, but the bottom line plunged as streaming costs added up. Nike won't report its results until March, but it may miss expectations after the company announced temporary store closures in China.
Disney reports epic streaming numbers, tumbling profits
So far, Disney has found plenty of customers for its Disney+ streaming service. The new entry in the streaming wars had racked up 26.5 million subscribers by the end of 2019, exceeding Disney's expectations. The company's other streaming services grew as well. ESPN+ more than quadrupled its subscriber base over the past year to 6.6 million, while Hulu's subscriber base increased by 33%.
Image source: Disney.
Total revenue came in at $20.9 billion for Disney's fourth quarter, up 36% year over year and $50 million higher than the average analyst estimate. Revenue in the direct-to-consumer and international segment, which contains the streaming business, rose by more than 300% thanks to streaming growth and the full inclusion of Hulu's results.
The media networks segment was also a strong performer, with revenue rising 24% to $7.4 billion. The acquisition of 21st Century Fox closed in March 2019, so Disney's year-to-year comparisons are still benefiting from that deal.
The profit picture didn't look as good for Disney. Earnings per share plunged 37% year over year to $1.17, and adjusted EPS was down 17% to $1.53. The adjusted figure was ahead of analyst estimates by $0.09. The direct-to-consumer and international segment posted an operating loss of $693 million, worse than a $136 million loss in the same period last year. Disney expects Disney+ to turn profitable by 2024.
Shares of Disney were down around 2.5% Wednesday morning as investors digested the company's results. The stock has risen nearly 30% over the past year, but the valuation has been stretched in the process. Based on the average analyst estimate for 2020, Disney stock now trades for roughly 26 times earnings.
Nike warns on China
Shares of Nike were down 1.2% Wednesday morning after the footwear and apparel giant provided an update on the impact of the coronavirus outbreak on its business. Nike said that roughly half of its company-owned stores in China had been temporarily closed, and a similar percentage of partner stores had been closed as well. In the stores that are still open, Nike has reduced operating hours and is seeing sluggish retail traffic.
"In the short term, we expect the situation to have a material impact on our operations in Greater China. However, NIKE's brand and business momentum with the Chinese consumer remains strong, as reflected in the continued strength of our NIKE digital commerce business," the company said in its press release.
Nike's guidance for the third quarter, issued when the company reported its second-quarter results in December, came before the first coronavirus case was detected. Nike hasn't adjusted its guidance, but it's possible the company will come up short of expectations. Nike will provide an update on the impacts of the outbreak during its third-quarter earnings call in March.
