Disney Resort in the Path of Hurricane Milton, Estimated Losses up to $200 Million

Walt Disney World Resort is in the projected path of Hurricane Milton. Goldman analysts predict that the storm's disruptions and closures could cost the entertainment giant anywhere between $150 million and $200 million in this quarter.

Impact of Hurricane Milton on Walt Disney World Resort

The hurricane is anticipated to make landfall in Central Florida late Wednesday night or early Thursday morning as a Category 4 storm. Disney has already ceased park operations, and all parks are expected to remain closed on Thursday.

Financial Impact of the Hurricane

Goldman analysts, led by Michael Ng and Shelby Spencer, estimate a $150 million to $200 million adverse impact on F1Q25E Parks & Experiences EBIT, driven by a 4 pp adverse impact on domestic attendance growth in F1Q25E. This is based on historical headwinds from hurricanes due to closure and disruption times. For instance, Hurricane Irma in 2017 resulted in a $100 million headwind to Disney's EBIT and a 3 pp headwind to domestic parks attendance, with two days of closure at Walt Disney World and some cruise ship itinerary disruptions.

Future Financial Predictions

Ng and Spencer have stated that their F4Q24E estimates remain unchanged and forecast Disney to deliver F4Q24E EPS of $1.16 and segment OI of $3.8 billion. However, they have reduced their F1Q25E Parks and Experience EBIT from the estimated hurricane impact, pushing down the F2025E EPS estimate to $5.14. They added that their F2026/27 EPS are essentially unchanged on average at $5.96/$7.10. They also noted that previous storms, including Hurricanes Ian, Dorian, Irma, and Matthew, forced Disney to close resorts for 1-2 days on average.

Impact of the Hurricane on Disney's Future Operations

The analysts have reduced their F2025 EBIT estimate by 1% due to the likely impacts of Milton in the next 12 to 24 hours. Estimates in F2024, F2026, and F2027 remain unchanged. Despite the hurricane's forecast directly impacting Disney's resort, the analysts told clients that they are Buy rated on shares of Walt Disney Co. with a 12-month price target of $120. Shares are currently trading at a 26.5% discount versus Goldman's price target.

Potential Non-Weather-Related Risks for Disney

The analysts also highlighted non-weather-related downside risks for Disney, which include intensified cord-cutting, sports rights cost inflation, streaming competition, economic slowdown impacting consumer spending, weak theatrical slate, M&A, unfavorable regulatory or policy reforms, higher than expected interest rates, and FX. With the strength and trajectory of Milton and many meteorologists claiming this storm is one for the history books, the probability that Disney's resort could be closed for longer than the projected 1-2 days continues to rise.

Bottom Line

The impact of Hurricane Milton on Walt Disney World Resort is a stark reminder of the unpredictable nature of weather events and their potential to significantly disrupt business operations. The estimated financial loss underscores the importance of contingency planning in the face of natural disasters. What are your thoughts on this situation? Feel free to share this article with your friends and discuss. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.