Disney Stock Surges on Strong Earnings
Walt Disney (DIS) shares were on the rise following the entertainment giant’s quarterly earnings that exceeded Wall Street’s expectations.Results for the fiscal fourth quarter ended Sept.
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Disney Stock Surges on Strong Earnings
Walt Disney (DIS) shares were on the rise following the entertainment giant’s quarterly earnings that exceeded Wall Street’s expectations.Results for the fiscal fourth quarter ended Sept. 30 included stronger-than-anticipated subscriber growth for its Disney+ streaming service.The stock saw a 4% increase in premarket trading the morning after the report.
Disney reported revenue for the quarter of $21.2 billion, a 5% increase from the year-ago quarter, slightly below Wall Street’s consensus estimate of $21.4 billion. Profits were 82 cents a share, up from 30 cents a year earlier and surpassing the Street’s 71 cents; earnings from continuing operations were 14 cents, up from 9 cents in the year-earlier period.
The company added nearly seven million core subscribers to Disney+ in the quarter, bringing the total to 112.6 million, surpassing expectations by about three million subscribers.
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Disney now boasts 5.2 million subscribers for its ad-supported version of Disney+, with over half of new domestic subscribers opting for the ad tier. Disney also announced it doesn’t plan to address password sharing until 2025. The company anticipates streaming to become profitable in the fourth quarter of fiscal 2024.
In its entertainment segment, which includes movies and television, Disney posted revenue of $9.5 billion, a 2% increase from a year earlier, falling slightly short of Street estimates.
The sports segment, primarily ESPN, reported revenue of $3.9 billion, maintaining the same level as the previous year and aligning with estimates. The experience segment, encompassing theme parks, cruises, hotels, and licensed products, achieved revenue of $8.2 billion, marking a 13% increase and surpassing consensus expectations of $7.8 billion.
The company reiterated its commitment to cost reduction, revising its “annualized efficiency target” to $7.5 billion, up from $5.5 billion.
CEO Robert Iger noted, “Our results this quarter reflect the significant progress we’ve made over the past year. While we still have work to do, these efforts have allowed us to move beyond this period of fixing and begin building our businesses again.”
For the December quarter, Wall Street’s projections include revenue of $24.2 billion and profits of $1.15 per share.
During a conference call with analysts, Disney revealed expectations for fiscal 2024, with capital expenditures set at $6 billion, a $1 billion increase from 2023, linked to investments in three new cruise ships launching in 2025 and 2026. Content spending for fiscal ’24 is projected at $25 billion, a decrease from this year’s $27 billion, with sports rights constituting over 40% of the total.
Interim CFO Kevin Lansberry shared that management will propose to the board the resumption of dividend payments before the end of the calendar year. Additionally, the company anticipates $8 billion in free cash flow in fiscal 2024.
For the full fiscal year, Disney reported revenue of $88.9 billion, a 7% increase. This includes a 3% rise in the entertainment segment to $40.6 billion, a 16% improvement in experiences to $32.5 billion, and a 1% decline in sports to $17.1 billion.
Walt Disney shares have lagged behind this year’s market rally, down 3% since the end of December. The company faces challenges from weaker results at ESPN, slower growth in the streaming sector, and the ongoing decline of linear TV viewing.
Under pressure to make significant moves, Iger has expressed openness to selling non-core assets, potentially including major properties like ABC. The company also aims to reshape the future of ESPN, potentially through partnerships with external financial entities.
Disney shareholders are getting acquainted with their new Chief Financial Officer, Hugh Johnston, appointed to the position on Monday.
Johnston takes over from interim CFO Kevin Lansberry, who held the role since June, stepping in after the departure of Christine McCarthy. With a remarkable 34-year career at PepsiCo (PEP), Johnston joins Disney after serving as CFO and vice chairman in his most recent role at the beverage giant.
In a recent research note, Lightshed Partners analyst Richard Greenfield raised a dozen strategic questions for Disney as they approach the upcoming quarter. Among them, a significant focus is directed towards the future of ESPN, particularly Disney’s plan to introduce a direct-to-consumer version of the channel, considering the decline in cable TV subscribers. Greenfield pointed out a core challenge for ESPN, noting that the escalating cost of sports rights is outpacing the associated revenue growth.