Hurricane Milton has been building up steam and making headlines in recent days, with meteorologists predicting that the formidable storm will significantly affect the sweet spots of American economy. According to Goldman Sachs, leading investment manager, the Walt Disney Company’s earnings could undergo a sizeable reduction due to the wrath of this hurricane.
The Disney corporation, a leading global entertainment company, heavily relies on its theme parks across the globe to earn a large chunk of its revenue. While these places of whimsical entertainment often provide a steady source of income, they are also highly susceptible to natural disasters like hurricanes. The primary concern instoked by Hurricane Milton revolves around Disney’s theme parks, especially those located in America.
Disney World in Florida and Disneyland in California draw millions of visitors every year, generating a substantial income for the company. However, as Hurricane Milton is predicted to hit the East Coast, it will likely affect the operation of Disney’s theme parks. Based on historical data, it’s evident that hurricanes in these areas typically cause closures of these parks resulting in significant revenue loss.
Moreover, the hurricane’s destructive effects could translate to weeks or even months of repairs, further affecting the company’s earnings. Disney also has to bear the costs of any cleanup, restoration, and ensuing insurance claims. All these extra expenses stack up, further challenging the company’s bottomline.
Goldman Sachs analysts have drawn parallels from previous similar situations, where extreme weather forced the parks to close for extended periods, thereby severely affecting Disney’s earnings. For instance, in 2017, Hurricane Irma instigated a two-day closure of Disney World, Florida. Disney’s operating income experienced a $100 million blow in that quarter alone due to this unforeseen event.
Additionally, Disney’s latest venture – Disney Cruise Line- could be another target of Hurricane Milton. With the storm’s forecasted path covering a broad expanse of the eastern seaboard where several of Disney’s cruise ships operate, these luxury cruises’ operations could also potentially halt, fuelling further losses.
Furthermore, Disney’s earnings from merchandising, film releases, and media networks also cannot escape these impacts. Multiplexes may shut down due to storm conditions, disrupting new film releases. Television networks might experience disruption in their schedules as constant weather updates take precedence, affecting advertisement revenue.
However, Goldman Sachs points out that the potential upside lies in Disney’s growing digital platform, Disney+. As people are forced indoors due to the storm, there may be an upsurge in subscriptions, which could offset some losses from the more traditional revenue streams.
Nonetheless, the overall trend Goldman Sachs underscores is one of caution and potential economic fallout. Hurricane Milton is a stark reminder of how even the most diversified and robust businesses can be vulnerable to the unpredictable forces of nature. Only time will reveal the complete impact of the storm on Disney’s earnings. This scenario underscores the necessity for companies to build comprehensive contingency plans to ward off—or at least soften—the economic hit from such natural calamities.
