Walt Disney Co.’s stock experienced a slight dip in after-hours trading on Wednesday following the release of its quarterly results. The media giant reported a fiscal third-quarter loss of $460 million, or 25 cents a share, primarily due to restructuring and impairment charges. However, after adjusting for these costs and other impacts, Disney’s earnings stood at $1.03 a share. The company also witnessed a 4% increase in revenue, totaling $22.3 billion compared to $21.5 billion the previous year.
Meeting Analyst Expectations
The average adjusted earnings predicted by analysts surveyed by FactSet were 96 cents a share, with an estimated revenue of $22.5 billion. While Disney’s results were relatively in line with these expectations, the stock experienced a 1% decline in after-hours trading immediately after the report was released. During the regular session, the stock had already dropped 0.7% to $87.52.
Restructuring Efforts Underway
Disney’s Chief Executive, Robert Iger, expressed satisfaction with the company’s achievements in a statement announcing the results. He highlighted the ongoing efforts to transform and restructure Disney, improve efficiency, and restore creativity as the focus of their business. Iger returned to the CEO position in late 2022, spearheading a $5.5 billion cost-cutting plan to guide the company back on track.
Positive Performance in Direct-to-Consumer Sales
Disney’s direct-to-consumer sales, which include streaming services and select international products, amounted to $5.5 billion for this quarter. While slightly below analysts’ expectations of $5.7 billion, it represented an improvement from the previous year’s total of $5.05 billion. Furthermore, the division successfully reduced its quarterly losses to $512 million compared to $1.06 billion a year ago, outperforming analysts’ expectations of a $758 million loss.
In summary, Disney’s quarterly report showcased their ongoing transformation and restructuring efforts, which have led to improved efficiency and reduced losses in the direct-to-consumer division. Despite a slight dip in stock value, the company’s results remained in line with analysts’ predictions.
Disney’s Revenues Rise Amidst Challenging Times
Theme Parks and Product Sales Show Growth
The Walt Disney Company has reported an increase in revenue for its iconic theme parks and product-sales business. The company generated $8.3 billion in revenue, compared to $7.4 billion in the previous year. The average analyst estimate was $8.1 billion, indicating a positive outcome.
Media and Entertainment Distribution Segment
Disney’s largest business segment, media and entertainment distribution, brought in $14 billion during the quarter. While this figure is slightly lower than the $14.1 billion from the previous year, it still demonstrates solid performance. Analysts had predicted $14.3 billion, according to FactSet.
Television Networks and Content Sales
Disney’s television networks recorded sales of $6.7 billion, just shy of analysts’ average estimates of $6.74 billion. The category of content sales and licensing, which includes Disney’s film business, reported revenue of $2.1 billion, slightly below expectations of about $2.15 billion.
Challenges in the Streaming Industry and Hollywood Strikes
In the lead-up to Disney’s results, concerns have arisen regarding the company’s streaming services, such as ESPN, as well as issues related to linear-TV ad sales. Additionally, ongoing strikes involving actors and writers have impacted Hollywood. Furthermore, Disney has faced legal and political challenges, particularly with Florida Governor Ron DeSantis.
The Battle for Streaming Supremacy
A significant focus remains on the success of Disney+, which competes with streaming giants like Apple Inc., Netflix Inc., Amazon.com Inc., Warner Bros. Discovery Inc., and Comcast Corp. Despite Macquarie Equity Research analyst Tim Nollen expressing confidence in Disney’s streaming services in the long term, he acknowledges several near-term challenges that need resolution for a more positive outlook.
Disney and DeSantis Engage in Duelling Lawsuits
Disney and Florida Governor Ron DeSantis, who is a potential nominee for the 2024 Republican presidential race, find themselves entangled in a legal battle. The root of this conflict dates back to Disney’s criticism of a Florida law that prohibits discussions on sexuality and gender identity with young children in classrooms. Recently, a group of former high-level government officials, most of whom are Republicans, condemned DeSantis’s takeover of Disney World’s governing district. They claimed that it severely damages Florida’s political, social, and economic fabric.
The concerns raised by these developments have led Deutsche Bank analysts to revise their price target for Disney shares. With worries revolving around lower advertising revenue, underperformance at the box office, and a decrease in park attendance in Orlando, the analysts have lowered their target by 8% to $120.
For Disney CEO Bob Iger, this earnings call holds significant importance since his return to the company in late 2023. He had an extensive list of tasks to tackle, but the board has now granted him an additional two years to address these challenges. Therefore, every word he chooses during Thursday afternoon’s earnings call must carry substantial weight, according to Rick Munarriz, an analyst at the Motley Fool.
The earnings call was scheduled to start at 4:30 p.m. Eastern Time.
While Disney shares have seen a modest increase of 0.7% this year, the broader S&P 500 index has experienced a more significant climb of 16%.
