Disney’s Fairy-Tale Quarter: Magical Earnings Propel Stock Surge

James Hyerczyk
Updated: Feb 7, 2024, 22:01 UTC

Disney's fiscal first-quarter earnings outshine forecasts, with an aggressive cost-reduction plan contributing to a 20% EPS growth expectation.

Disney’s Fairy-Tale Quarter: Magical Earnings Propel Stock Surge

Key Points

  • Disney exceeds earnings, projects 20% EPS growth.
  • Streaming losses down, direct-to-consumer revenue up.
  • Strong forecast with digital expansion and blockbuster releases.

Post-Close Wednesday Earnings Report

Following the market close on Wednesday, The Walt Disney Company released its fiscal first-quarter earnings, showcasing a performance that surpassed financial expectations. Central to this achievement is a robust cost-cutting strategy aimed at slashing expenses by at least $7.5 billion by the end of fiscal 2024. The company forecasts an earnings per share of around $4.60 for fiscal 2024, suggesting an anticipated increase of 20% compared to 2023.

Reflecting this strong performance, Disney’s stock rose approximately 7% in extended trading.

Daily Walt Disney Company

Financial Highlights

Disney reported adjusted earnings per share of $1.22, surpassing the expected 99 cents. However, revenue remained relatively stagnant at $23.55 billion, narrowly missing the anticipated $23.64 billion. The company’s net income rose significantly to $1.91 billion ($1.04 per share), compared to $1.28 billion (70 cents per share) in the previous year. Despite a flat revenue, this growth in net income signifies a strong financial position.

Streaming and Direct-to-Consumer Success

A notable achievement for Disney has been the reduction of its streaming losses. The direct-to-consumer unit reported a $138 million operating loss, a considerable improvement from the $1.05 billion loss in the same period last year. Despite a decrease in Disney+ core subscribers due to price hikes, the company observed an increase in average revenue per user. Furthermore, Disney announced a $1.5 billion investment in Epic Games and the upcoming launch of an ESPN streaming service in 2025, signaling a strategic expansion in digital media.

Investor Relations and Future Outlook

Amidst ongoing boardroom struggles with activist investor Nelson Peltz, Disney’s financial results are critical. CEO Bob Iger’s commitment to revitalizing Disney’s film slate, with a focus on original content over sequels, is a strategic move. However, significant box office impact from these changes is not expected until 2025 or 2026, coinciding with the release of major titles like Avatar, Star Wars, and Avengers films.

Revenue Across Divisions

Disney’s new financial reporting structure divides the company into three segments: entertainment, sports, and experiences. The entertainment division saw a 7% revenue drop to $9.98 billion, affected by declining linear networks and licensing fees. In contrast, the direct-to-consumer sector witnessed a 15% increase to $5.55 billion. ESPN’s revenue rose by 4% to $4.84 billion, attributed to growth in subscription revenue and reduced production costs. The experiences division, encompassing theme parks, hotels, and cruise lines, reported a 7% revenue increase to $9.13 billion, despite lower attendance at Florida parks.

Market Forecast

Short-term market outlook for Disney appears bullish, backed by solid financial performance, strategic investments in streaming and digital ventures, and anticipated blockbuster releases. The company’s focus on cost management, coupled with diversified revenue streams, positions it favorably for sustained growth in the coming years.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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