Disney’s stock pops on big earnings beat, dividend, lower streaming losses
Walt Disney Co.’s stock popped 7% higher in after-hours trading Wednesday on stronger-than-expected quarterly earnings, deeper cuts, and a massive reduction in its streaming-business losses.
The company’s embattled board of directors approved a stock buyback of $3 billion — its first since 2018 — and declared a cash dividend of 45 cents a share payable July 25. The dividend program had been suspended during COVID. It also guided to a 20% increase in EPS for fiscal year 2024, to $4.60.
The entertainment giant also announced it is investing $1.5 billion for an equity stake in Epic Games Inc., the publisher of the massively popular videogame “Fortnite.”
Disney
DIS,
which is girding for an activist-investor confrontation at its annual shareholders meeting on April 3, reported fiscal first-quarter net income of $1.91 billion, or $1.04 a share. After adjusting for restructuring costs and other effects, Disney reported earnings of $1.22 cents a share.
Revenue was flat at $23.55 billion.
Analysts surveyed by FactSet had, on average, expected adjusted earnings of 99 cents a share on revenue of $23.7 billion.
“Just one year ago, we outlined an ambitious plan to return the Walt Disney Co. to a period of sustained growth and shareholder value creation,” Chief Executive Bob Iger said in a statement announcing the results. “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.”
In a wide-ranging interview with CNBC shortly after the results were disclosed, Iger said he is confident the company will find a successor for him when his contract expires at the end of 2026. He added Disney is on track to meet or exceed its $7.5 billion annualized savings target by the end of fiscal 2024.
Also see: Opinion: Disney is making progress on a key goal, and is ready to pull another lever
Disney’s largest business segment, entertainment, generated $9.9 billion in revenue, down 7% from the same quarter a year ago.
Experiences hauled in $9.13 billion, an increase of 7% from $8.55 billion last year. Sports, which includes ESPN, generated $4.84 billion.
Disney+ reached 111.3 million subscribers, while substantially lowering the division’s quarterly loss of $138 million, compared with a loss of nearly $1 billion in the same quarter last year. Disney is locked in a streaming race with Netflix Inc.
NFLX,
Apple Inc.
AAPL,
Amazon.com Inc.
AMZN,
Warner Bros. Discovery Inc.
WBD,
Comcast Corp.
CMCSA,
and others. Disney Chief Financial Officer Hugh Johnston said a crackdown on password sharing is underway, following in the footsteps of Netflix.
It was also announced that the record-setting concert movie “Taylor Swift: The Eras Tour” will debut on Disney+ on March 15, with four additional songs not available in the theatrical or DVD release, and a sequel to the hit animated 2016 movie “Moana” will be coming to theaters Nov. 27.
Read more: Disney leans into ‘Moana,’ Taylor Swift and ‘Fortnite’ for future growth
As the company celebrates its 100th anniversary, it faces a labyrinth of problems. While Iger attempts to turn a profit with the streaming business, he faces a showdown with activist investors.
In the latest twist Tuesday, investment firm Blackwells Capital implored shareholders to elect its three nominees to the board of directors and split Disney into three parts: sports, entertainment and resorts. Another activist investor, Trian Partners, has proposed two members to Disney’s board.
See: Disney activist Blackwells proposes splitting up company in proxy fight
Iger said he has not talked to the activists, and dismissed their actions as a “distraction.”
A Trian Partners spokesperson summed up Disney’s results as, “It’s déjà vu all over again. We saw this movie last year and we didn’t like the ending.”
Disney’s results come on the heels of a blockbuster partnership unveiled Tuesday. ESPN, Fox Corp.
FOX,
and Warner Bros. Discovery Inc.
WBD,
said they will create a joint venture sports streaming service, available as early as the fall, that will offer a sort of Hulu model for sports programming.
The joint venture marks a major milestone taking ESPN in the direction of the direct-to-consumer business, Iger told CNBC, and Disney continues to look for business partners for the service. He said pricing for the unnamed venture will be less than what it costs to buy each separate sports package.
Read more: Disney, Fox and Warner Bros. team up to launch new sports streaming service
ESPN will be available as a standalone streaming service in August 2025, according to Iger. It is likely to have integrated betting, stats and personalized data, he said during a conference call with analysts.
Shares of Disney have dropped 11% over the past year. The S&P 500
SPX
has climbed 21%.
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