Written by Norman Isaac Mwambazi

What to know this week: Uber, Lyft, and Disney earnings

According to data collected by FactSet, more than half of the companies included on the benchmark S&P 500 have reported …

According to data collected by FactSet, more than half of the companies included on the benchmark S&P 500 have reported their Q4 FY2020 earnings and interestingly, 81% of them have exceeded earnings expectations.

Going with this pace, FactSet says that it would tie with the second-highest percentage of earnings since the company started tracking the metric in 2008. Currently, Q4 earnings are on track to rise by 1.7%, and if they ultimately do, it would mark the first quarter that S&P 500 companies report aggregate earnings growth since the final quarter of 2019 just before the COVID-19 pandemic set in.  

This week, traders, investors and analysts like are majorly looking forward to three companies releasing their Q4 earnings reports namely; two ride-hailing rivals Lyft and Uber, and media giant Disney. Lyft and Uber will report their results on Tuesday and Wednesday after market close respectively, and Disney will follow on Thursday, February 11, 2021.

As it has been for almost all companies in 2020, the COVID-19 pandemic dealt a blow to both Lyft and Uber throughout much of the year due to the lockdown restrictions that were imposed by governments around the globe. Lyft saw its revenues fall by 48% in Q3 FY2020 and 20% at Uber.

However, as the COVID-19 vaccine is being rolled out and restrictions easing, many analysts noted that the worst is probably behind for both of these companies as the economy starts to reopen later this year.

Dan Ives, an analyst at Wedbush wrote in a note:

“We see a confluence of positive factors giving Uber and Lyft tailwinds into 2021 with more investors coming back to the story with many of the dark clouds clearing (Prop 22, demand improving), and a greater focus on ‘reopening’ plays.”

For Prop 22, Wedbush was referring to the California proposition that allowed both companies to continue classifying their drivers as a contract rather than full-time workers.

At the release of last quarter’s earnings report in November 2020, both companies affirmed their upward trajectory.

Uber CEO Dara Khosrowshahi said during the company’s Q3 earnings release that he expected adjusted Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) losses would improve on a year-over-year basis in Q4, after widening by about 7% to $625 million in Q3. The company also doubled down on its target of hitting its first quarter of adjusted EBITDA profitability by the end of 2021.

On the other hand, Lyft CEO Logan Green also said last quarter that the company expected to report its first quarter of adjusted EBITDA profitability by the end of this year, even if rides remain depressed compared to when they first issued that guidance back in late 2019.

At the time, Green also said operating expenses would retreat further this year, and that revenue per active rider would pick up, suggesting more frequent rides by Lyft users.

It is worth noting that Uber has had an edge over Lyft during the pandemic because the company operates a food delivery division as well, known as UberEats.

Due to the stay-at-home directives and more people forced to work from home during the pandemic, more people resorted to ordering more food online, helping offset declines in ride-hailing.

Gross bookings UberEats business more than doubled in both Q2 and Q3 of 2020, while mobility bookings more than halved over both periods. And while UberEats remains an unprofitable unit of Uber, Khosrowshahi said in November he was confident the delivery business would post adjusted EBITDA profitability “sometime next year.”

To supplement the yet-to-be profitable food delivery business, Uber announced early this year that it would be acquiring the alcohol-delivery company Drizly with the deal expected to be finalised in the first half of 2021 and will not be reflected in fourth-quarter results, but may factor into the company’s guidance, if issued this week. Uber’s earlier acquisition of peer food-delivery company Postmates closed in December 2021, prior to the end of the fourth quarter.

Stock performance

Uber’s shares have risen 57% over the last year and 29% since market close of November 6, 2020, after which Pfizer and BioNTech first announced their breakthrough COVID-19 vaccine which sent shockwaves all over the global stock markets. Uber’s stock is currently going for $59.03 per share.  

Lyft shares have risen 9.5% over the last year, but 40% since the close of November 6, 2020. The company’s stock is now trading at $53.15 per share.

Disney

This American diversified multinational mass media and entertainment conglomerate is also poised to report earnings this week on Thursday but unlike Uber and Lyft, this is going to Disney’s first quarter of the fiscal year 2021 (Q1 FY2021). It is expected to reflect ongoing growth in the company’s streaming platform Disney+ alongside some improvement across the company’s more virus-exposed theme parks and experiences businesses.

Disney+ has been a key source of momentum for the entertainment giant while other areas of the business floundered during the pandemic. At the company’s investor day in December last year, Disney reported that the streaming platform boasted over 86.2 million subscribers as of December 2, 2020, reaching that level in just over a year of operation. Across all operations including Hulu and ESPN+, streaming subscribers totalled 137 million.

However, the company’s subscriber numbers are still way lower than Netflix’s, which reported nearly 204 million global paid viewers as of the end of last year.

Still, the breakneck growth so far at Disney+ has already led the company to upwardly revise its longer-term projections. Disney said at its investor day that it now expects between 230 million – 260 million global subscribers by the end of fiscal 2024, up significantly from the 60 million – 90 million target the company posted in 2019.

Disney+ is expected to become a profitable business segment of the Walt Disney Company by fiscal 2024 as well albeit the company’s plan of increasing the price of Disney+ subscription by $1 to $7.99 for U.S. users starting in March.

However, while Disney+ soared, Disney’s parks, cruises and other live entertainment operations suffered throughout much of 2020 due to the pandemic. This area of the business had once comprised the profit engine of Disney prior to the virus but swung to losses in each of the fiscal fourth and third quarters of last year as visitations dried up.

Most of Disney’s global parks have reopened with limited capacity but its leading theme parks in Anaheim, California remain closed due to the pandemic. Disneyland and Disney California Adventure have both been closed since last March, and the aggregate impact of global park closures and weak visitor trends led Disney to slash tens of thousands of jobs throughout last year.

Last week, however, two California Assembly members introduced legislation that would allow theme park operators to reopen their locations sooner than previously proposed.

Disney’s shares have risen 28% over the last year, outperforming the S&P 500’s 16.6% gain over that period. The company’s shares go for $189.52 each.  

Here is this week’s earnings clender:

Monday: Hasbro (HAS) before market open; Take-Two Interactive (TTWO), Chegg (CHGG) after market close

Tuesday: Centene (CNC), Coty Inc. (COTY), S&P Global (SPGI) before market open; Tenet Healthcare (TNT), Twitter (TWTR), Lyft (LYFT), Cisco Systems (CSCO) after market close

Wednesday: Coca-Cola (KO), Under Armour (UAA), CME Group (CME), General Motors (GM) before market open; Uber (UBER), MGM Resorts International (MGM), Zillow Group (ZG), iRobot (IRBT), Sonos (SONO), Spirit Airlines (SAVE), Zynga (ZNGA), O’Reilly Automotives (ORLY) after market close

Thursday: PepsiCo (PEP), Kraft Heinz (KHC), Yeti Holdings (YETI), Tyson Foods (TSN), Molson Coors (TAP), Duke Energy (DUK), Kellogg (K) before market open; GoDaddy (GDDY), Disney (DIS), DataDog (DDOG), Expedia (EXPE), HubSpot (HUBS), Affirm Holdings (AFFM) after market close

Economic Calendar

Tuesday:

  • NFIB Small Business Optimism, January (97.0 expected, 95.9 in December);
  • JOLTS Job Openings, December (6.450 million expected, 6.527 million in November)

Wednesday:

  • MBA Mortgage Applications, the week ended February 5 (8.1% during the prior week);
  • Consumer Price Index, month-over-month, January (0.3% expected, 0.4% in December);
  • Consumer Price Index excluding food and energy, month-over-month, January (0.2% expected, 0.1% in December);
  • Consumer Price Index year-over-year, January (1.5% expected, 1.4% in December);
  • Consumer Price Index excluding food and energy year-over-year, January (1.5% expected, 1.6% in December);
  • Real Average Hourly Earnings year-over-year, January (4.1% in December);
  • Real Average weekly Earnings, year-over-year, January (5.3% in December);
  • Wholesale inventories, month-over-month, December final (0.1% expected, 0.1% in prior print);
  • Monthly Budget Statement, January (-$143.6 billion in December).

Thursday: Initial jobless claims, the week ended February 6 (773,000 expected, 779,000 during the prior week) Continuing claims, the week ended Jan. 30 (4.592 million during the prior week)

Friday: University of Michigan Sentiment Index, February preliminary (80.9 expected, 79.0 in January).