The Walt Disney Company will report its fiscal third-quarter earnings Thursday after the market closes, giving investors insight into how its businesses are bouncing back from the Covid-19 pandemic. The company faced massive losses during the pandemic when its theme parks, cruises and hotels were forced to shut down, and its blockbuster films could no longer be showcased in theatrical venues. Its streaming service Disney+ became the sole bright spot in the company's portfolio, inspiring investors at a time when revenue was crippled. Shares of the company are up about 35% compared to a year ago, but are down from the all-time high of $203.02 per share reached in March. Much of this is due to smaller-than-expected Disney+ subscriber growth in the fiscal second quarter, which led some analysts and investors to question if the company could sustain the massive gains it made during the pandemic. The company will also likely address its Disney+ Premier Access strategy , which places blockbuster films in theaters and on Disney+ on the same day. While the company has had some success in selling one-time $30 upcharges to see new movies, the approach has eaten away at box office sales and put it at odds with one of Hollywood's biggest stars, Scarlett Johansson . During the quarter, Disney benefited from a rise in vaccinations and a loosening of health and safety mandates . All of its theme parks reopened and the domestic box office showed signs of resurrection. Heading into Thursday's earnings report, Wall Street foresees strong results and is expecting earnings of 55 cents per share on revenue of $16.76 billion, according to Refinitiv. These estimates suggest growth of more than 42% from the year-ago quarter's reported figure. As important as the third-quarter results are to understanding the health of Disney's various businesses, investors will also need to listen for information about the next quarter and beyond. A surge in Covid, particularly delta variant cases, has led many local governments to reestablish health and safety measures. There are fears that consumers could dial back spending at movie theaters and theme parks and that gains from the first half of the year could dissipate. As Disney rolls out its results, investors should pay close attention to these five key areas. 1. The Covid delta variant The rise of the delta variant creates uncertainty for movie theaters and theme parks. Disney announced late July that all salaried and non-union hourly workers in the U.S. have to be fully vaccinated by September . It also said it has begun conversations with the unions that represent its other employees, particularly those who work at its theme parks. The company has adopted safety measures based on domestic and international government mandates, requiring masks at indoor locations in California and vaccine cards at Paris Disneyland. Investors should listen carefully for how Disney's executive team plans to deal with these new delta variant challenges. The company could opt to alter its strategy for future theatrical releases or readopt health and safety regulations it implemented prior to the arrival of the delta variant. 2. Theme park attendance and sales Disney's domestic parks eased restrictions in April, which led to higher attendance. While guest capacity wasn't at the peaks seen before the pandemic, analysts expect a boost in revenue from the parks, experience and consumer products division. The resurrection of the theme park industry is critical to Disney's bottom line. In 2019, the segment — which includes cruises and hotels — accounted for 37% of the company's $69.6 billion in total revenue. "The data points are really encouraging," KeyBanc analyst Brandon Nispel said. "It's a good business, consumers like [theme parks]. I assume they will recover, not just to 2019 levels, but beyond that. They've made strides during the pandemic to reduce cost and create better operations." Nispel noted that theme parks have seen a boost during the quarter, pointing to rival Comcast , which owns and operates several Universal Studios theme parks around the world, as one example. In July, Comcast reported its first profitable period for theme parks since the first quarter of 2020. Investors should listen for information about Disney's new California-based Avengers Campus theme park land, which opened during the quarter. They should also look for details about the company's new annual passholder program and its Star Wars: Galactic Starcruiser hotel . Increased ticket sales and higher spend on food and merchandise are positive signs. The company will also likely provide updates on its cruise business, which was hit particularly hard by the pandemic. 3. Disney+ subscriber growth Disney's streaming service had been bolstering the company's success , while its other business were struggling from Covid restrictions. However, its results from the prior quarter indicated growth was beginning to slow. Still, the company says it plans to see between 230 million to 260 million subscribers to Disney+ by 2024. Analysts are expecting Disney to announce that it reached around 114 million subscribers, according to StreetAccount. That would be up from nearly 104 million three months ago. Investors have been more interested in Disney+ subscriber growth, because it is the company's newest streaming offering. However, added Hulu and ESPN+ users are also important. Disney had around 159 million total subscribers across its streaming services as of the end of the second quarter. Disney pushed heavily into streaming in the last two years. It restructured its media and entertainment divisions to focus more on this area and has invested capital in creating dozens of film and television shows just for its platforms. Exclusive content released on the streaming service during the most recent quarter included episodes of Marvel series "The Falcon and the Winter Soldier" and "Loki," Star Wars' "The Bad Batch," as well as the second season of "High School Musical: The Musical: The Series." Most notably, the "Loki" series was one of the top-watched programs during the quarter across all industry streaming platforms. Disney also released its latest Pixar feature "Luca" on the service for free and "Cruella" as part of its Premier Access program. Subscribers who wished to watch "Cruella" at home needed to pay an additional $30. Disney did not release information about how much "Cruella" garnered from Disney+ sales in its box office reports. It was only after the release of "Black Widow" in July that the company started reporting how much these Premier Access films tallied in sales. Executives may use the conference call to give more details about how "Cruella" performed. In addition to subscriber numbers, investors should be looking at a key metric: average revenue per user. This tells investors how much money a company is making for each individual streamer. Disney's average revenue per user has shrunk in recent quarters because of the lower price points for its Disney+ and Hotstar bundle in Indonesia and India . The service has lower average monthly revenue per paid subscriber than traditional Disney+ in other markets, pulling down the overall average for the quarter. 4. Theatrical releases This Friday, 20th Century Studios' "Free Guy" will become the first Disney film to be released exclusively in theaters since the pandemic began. Because the pandemic crippled the movie theater industry, Disney adopted a hybrid release model that accommodated fans who were comfortable returning to cinemas and those who'd prefer to view blockbusters at home. Company executives said this was a temporary strategy. In fact, the rest of Disney's 2021 slate is expected to have exclusively theatrical releases, starting with "Free Guy." However, as local governments have reinstituted mask mandates and other safety measures, there are concerns that Disney may need to shift back to this hybrid release plan. While placing these films in cinemas and on streaming has resulted in smaller box office hauls, it has allowed Disney to distribute its movies — which have been delayed for over a year — and drive more eyeballs to its streaming service. For its Marvel Cinematic Universe franchise, this is important. Each film and television show is created to link to each other and set up future releases. If one gets held back, they all get held back. Many have speculated that Disney could opt to place "Shang-Chi and the Legend of the Ten Rings" and other upcoming titles on Premier Access, even though the company said it would have an exclusive 45-day theatrical release. 5. Scarlett Johansson and the hybrid release dispute Controversy over Disney's hybrid release strategy, which was also used for "Mulan" and "Raya and the Last Dragon," arose in July after the simultaneous release of "Black Widow." While the box office receipts of the Marvel film and the more than $60 million in Disney+ sales will not be reflected in this quarter's earnings, analysts will be keen to hear about the company's future theatrical plans. It was clear that streaming cannibalized box office receipts, so much so that "Black Widow" star Scarlett Johansson has sued Disney for breach of contract. The actress claims that by placing the Marvel film on streaming at the same time as its cinematic release, she lost out on major box office bonuses. Typically, companies do not comment ongoing lawsuits, but Disney responded to Johansson's lawsuit with a scathing public statement that suggested the star had a "callous disregard" for the coronavirus and revealed it had paid her $20 million so far. The statement drew the ire of Johansson's famed Hollywood agent, Bryan Lourd, as well as the Screen Actors Guild. The development also raised questions about how other actors, who had similar contracts that guaranteed bonuses for box office performance, may respond to having their own films released on Disney+ and in theaters. It's unclear if executives will comment on this during the earnings call Thursday, but their responses, or lack thereof, could be key to understanding their strategy for working with top talent going forward. Disclosure: Comcast is the owner of NBCUniversal, the parent company of CNBC.
A stunning firework show is held at the Magic Kingdom Park in Walt Disney World Resort on July 1, 2021 in Lake Buena Vista, Florida. .
Liao Pan | China News Service | Getty Images
The Walt Disney Company will report its fiscal third-quarter earnings Thursday after the market closes, giving investors insight into how its businesses are bouncing back from the Covid-19 pandemic.