Disney (DIS) announced its fiscal fourth-quarter earnings on Wednesday after the bell, exceeding expectations. The company raised its annual cost-cutting goal to $7.5 billion, up from the previous target of $5.5 billion set in February. This includes an annualized cut to content spending of $4.5 billion, up from the previous goal of $3 billion.
The streaming numbers were notably strong, with Disney+ seeing nearly 7 million net additions, surpassing consensus estimates of 2.68 million.
Streaming losses narrowed to $387 million from $1.41 billion in the prior year period, following a second price increase this year, raising the monthly price of ad-free Disney+ and Hulu plans by more than 20%.
Bloomberg analysts had expected direct-to-consumer losses to reach $454 million in the quarter. In previous quarters, Disney reported losses of $512 million in Q3, $659 million in Q2, and $1.1 billion in Q1.
These results come after Disney announced its next CFO and its commitment to purchasing Comcast‘s 33% stake in Hulu.
During the earnings call, the company projected that its free cash flow would rise to $8 billion in full-year 2024, aided by reduced content spending. Disney plans to spend $25 billion on content next year, down from the $27 billion spent in 2023.
The company also stated its intention to recommend a dividend by the end of the calendar year. As a result, shares rose more than 3% in after-hours trading.
“We continue to expect that our combined streaming businesses will reach profitability in Q4 of FY24, although progress may not be linear from quarter to quarter,” the company noted in the release.
Adjusted earnings of $0.82 per share surpassed the expectation of $0.69 per share, more than doubling the earnings per share of $0.30 in the prior-year period. Revenue, however, slightly missed estimates, coming in at $21.24 billion compared to the expected $21.43 billion, representing a 5% increase from the prior-year quarter’s $20.15 billion.
The latest results marked the first time the media giant delivered earnings under its new reporting structure, which CEO Bob Iger implemented, categorizing the company into three core business segments: Disney Entertainment, Experiences, and Sports.
Here’s how each segment performed in the quarter compared to Wall Street consensus estimates:
- Entertainment revenue: $9.52 billion versus the expected $9.77 billion
- Sports revenue: $3.91 billion versus the expected $3.89 billion
- Experiences revenue: $8.16 billion versus the expected $8.20 billion
Disney’s stock has faced challenges, declining around 3% since the beginning of the year and 5% since Iger’s return. Shares hit a nine-year low last month, prompting activist investor Nelson Peltz to launch yet another attack on the media giant.
In an interview with CNBC following the earnings release, CEO Bob Iger confirmed having a call with Peltz but lacked specifics on the activist investor’s ultimate demands.
Iger addressed the stock price, stating, “We don’t manage the stock price for short-term gains. We have a long-term view, and this past year has been spent fixing things that needed to be addressed. …The long-term picture for Disney shareholders is quite bright.”
Iger also revealed that an integrated Hulu and Disney+ app is set to launch in March 2024, and ESPN will transition to streaming “no later than 2025.”
The company is actively seeking strategic partners, either through a joint venture or partial ownership, to enable ESPN to launch a new direct-to-consumer (DTC) service.
ESPN’s operating income for the quarter reached $953 million, up 15% compared to the previous year, primarily driven by its domestic business.
Disney attributed the higher domestic ESPN operating results to several factors, including reduced programming and production costs, increased subscription revenue from ESPN+, and a rise in advertising revenue, partially offset by a decline in affiliate revenue during the Charter dispute in September.
Standalone linear network revenue continued to decline, falling 9% in the quarter, with domestic operating income decreasing by 5% due to a weak advertising market, echoing the results of competitors. Disney cited the Hollywood strikes as another contributing factor.
ESPN accounts for less than 60% of total linear networks revenue, or approximately 30% of operating income.
In the Experiences division, which includes its parks, cruise lines, and consumer products, revenue surged 13% year-over-year in the quarter, reaching $8.16 billion. Operating income totaled $1.76 billion, slightly below estimates of $1.87 billion but 30% higher than Q4 2022’s $1.34 billion.
The company explained that lower results at its domestic parks and resorts were a result of reduced spending at Walt Disney World Resort due to inflation and decreased guest spending.
Disney plans to invest $60 billion into its theme parks business over the next 10 years, with most of its domestic parks growth expected in the second half of 2024.
