Earnings from the June quarter are starting to wind down, but in the week ahead we still expect to see reports from big names, starting with Walt Disney DIS on Tuesday, then CVS Health Corp CVS on Wednesday, and lastly Berkshire Hathaway BRK. BRK.B on Friday.
Although the lockdowns in March had consumers fleeing to at-home entertainment for comfort and distraction, the first quarter of 2020 saw significant television customer losses. With revenue streams from content licensing, we expect that the traditional television business and firms like Walt Disney will remain large enough. We believe these factors will support excess returns on capital over the next decade; however, we trimmed our fair value estimate for Disney after the media industry’s rough start in 2020. We had expectations that the industry would find creative ways to improve the price/value equation for consumers and fix its television problems, but our outlook has dimmed as streaming offerings become the priority.
CVS reported above our expectations in the first quarter after an increase in store activity as a result of the shelter-in-place orders. As a top-tier pharmacy and health insurer with pharmacy benefit manager franchises, the narrow-moat company is a leader in affordable healthcare. Despite concerns and impact from the coronavirus, we believe CVS’ 2020 will not be severely disrupted by the pandemic.
As a broadly diversified company with a collection of businesses from property-casualty insurance to railroads, utilities and pipelines, and more, we believe Berkshire Hathaway offers potential downside protection in a downturn. The wide-moat company acquired nearly all of Dominion Energy's natural gas transmission and storage operations, and we continue to expect that Berkshire Hathaway’s focus will be on utilities and energy.