Disney’s profit blew away forecasts although revenue fell a bit short in a key, and solid, earnings report that the company hopes will set the stage for more robust growth.
Revenue was flat at $23.5 billion for Disney’s fiscal first quarter ended in December. Diluted EPS (excluding some items) was $1.22, up 23% from the year before.
Entertainment DTC operating losses narrowed by $300 million from the prior quarter as streaming heads toward profitability by the end of fiscal 2024. Disney has said that would happen but a confirmation was very welcome. The stock jumped nearly 7% on the numbers, which came with a flurry of news on a standalone streaming ESPN, an animated Moana sequel, an investment in and partnership with Epic Games, and Taylor Swift’s Eras Tour film heading to Disney+ with five new songs.
Disney also announced a dividend payout that’s 50% higher than the last one, and a hefty new stock repurchase plan.
It was all a bit of shock and awe and comes as Disney faces a proxy fight with two activist investors who say the company should do more to create shareholder value with the stock off its highs.
Its up over 7% this afternoon.
“Just one year ago, we outlined an ambitious plan to return The Walt Disney Company to a period of sustained growth and shareholder value creation,” said CEO Bob Iger. “Our strong performance this past quarter demonstrates we have turned the corner and entered a new era for our company, focused on fortifying ESPN for the future, building streaming into a profitable growth business, reinvigorating our film studios, and turbocharging growth in our parks and experiences.”
“As we build for the future, the steps we are taking today lend themselves to solidifying Disney’s place as the preeminent creator of global content. Looking at the renewed strength of all of our businesses this quarter – from Sports, to Entertainment, to Experiences – we believe the stage is now set for significant growth and success, including ample opportunity to increase shareholder returns as our earnings and free cash flow continue to grow,” said the chief executive.
He’ll be talking with analysts at a call at 4:30 ET.
By sector, entertainment, which includes linear networks, direct to consumer and content sales/licensing saw revenue fall 12% to $2.8 billion.
Linear network profits dipped 5% on revenue down 14% on lower advertising sales at the ABC Network attributable to fewer impressions and lower political advertising revenue at the owned TV stations. It blamed the lower network impressions to the impact of the guild strikes on the programming schedule primarily due to a shift of units to the sports segment reflecting the simulcast of certain NFL games.
Disney noted a decline in affiliate revenue due to fewer subscribers at its entertainment cable networks, including the impact of the non-carriage of certain networks by an affiliate.
Streaming: Disney+ core subscribers nosed down 1%m or by 1.3 million, to 111.3 million, reflecting a substantial price increase in the quarter as well as the end of the global summer promotion.
Disney+ Core ARPU increased sequentially by 14 cents versus the fourth quarter.
Disney+Hotstar subs were up 2% at 38.3 million.
Total Hulu subs were 49.7 million — up by 1.2 million from the prior quarter — including 4.6 million for Hulu+ Live TV. Disney has paid Comcast a contractually required floor price of $8.6 billion to aquire the one-third of Hulu owned by the Brian Roberts-led company. The two sides and their bankers are working to value the asset to see if more is owed.
In all, streaming revenue rose 15% to $5.5 billion. Losses narrowed to $138 million from $948 million the year earlier.
ESPN is now the biggest part of a new Sports segment Disney breaks out. It saw flat revenue year-over-year of $4.4 billion. It swung to an operating profit of $199 millio from a loss of $38 million.
Parks & Experiences revenue, the company’s economic driver pretty much since Covid ended, saw revenue rise 7% to $9.1 billion. Income of $3.1 billion was up 8% but not domestically – that number was down 2%. Of the U.S. park, Disneyland was flat, Walt Disney World down.
The studio is part of Content Sales/Licensing and Other and had a tough quarter. Revenue plunged 38% to $1.6 billion and operating losses widened from $1 millio to $224 million. Very tough comps with The Marvels and Wish is the latest quarter, to Black Panther: Wakanda Forever, Avatar: The Way Of Water and Strange World in the year earlier period. With no new releases coming in the current fiscal Q2, results in the business will be flat.
Disney also said a focus on costs led to $500 million less in selling, general and administrative and other operating expense saving in the quarter. It’s on track to meet or exceed a $7.5 billion annualized savings target by the end of fiscal 2024. Disney also expects full year fiscal 2024 earnings per share excluding certain items to increase by at least 20% year on year, and free cash flow of $8 billion
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