Disney (DIS) reported fiscal fourth-quarter earnings after the bell on Wednesday that beat expectations as the company raised its annual cost-cutting target to $7.5 billion from $5.5 billion in February. This includes a $4.5 billion annual cut in content spending, down from $3 billion previously.
The company’s streaming numbers were much better than expected, with nearly 7 million net adds to core Disney+, compared to a consensus estimate of 2.68 million.
Streaming losses fell to $387 million from a loss of $1.41 billion in the same period last year after the company raised streaming prices for the second time this year, lowering the monthly price of its ad-free Disney+ and Hulu plans had increased by more than 20%.
Analysts polled by Bloomberg had expected direct losses to consumers to be $454 million in the quarter. Previously, the company reported a loss of $512 million in the third quarter, a loss of $659 million in the second quarter and a loss of $1.1 billion in the first quarter.
The results follow Disney’s official announcement of its next CFO and a commitment to acquire Comcast’s 33 percent stake in Hulu.
On the earnings call, the company said it expects free cash flow to increase to $8 billion in full-year 2024, supported by lower content spending. Disney expects to spend $25 billion on content next year, up from $27 billion in all of 2023.
A dividend is also proposed until the end of the calendar year. Shares rose more than 3% in after-hours trading following the results.
“We continue to expect our combined streaming businesses to reach profitability in the fourth quarter of fiscal 2024, although quarter-over-quarter progress may not appear linear,” the company said in the release.
Adjusted earnings of $0.82 per share beat expectations of $0.69 per share and were more than double the year-ago period’s EPS of $0.30. Revenue, meanwhile, slightly missed estimates of $21.43 billion, coming in at $21.24 billion, up 5% compared to $20.15 billion in the year-ago quarter.
The story goes on
Wednesday’s results mark the first time the media giant turned a profit under its new reporting structure after CEO Bob Iger restructured the company into three core business segments: Disney Entertainment, which includes its entire media and streaming portfolio; Experiences that include the parking business; and sports, which included ESPN networks and ESPN+.
Here’s how each of these segments performed in the quarter compared to Wall Street’s consensus estimates compiled by Bloomberg:
Entertainment revenue: $9.52 billion versus expected $9.77 billion
Sports revenue: $3.91 billion versus expected $3.89 billion
Earnings from Experiences: $8.16 billion against Expected to be $8.20 billion
Disney stock has struggled, losing about 3% since the start of the year and 5% since Iger’s return. Shares hit a nine-year low last month and activist investor Nelson Peltz launched another attack on the media giant.
In an interview with CNBC following the earnings release, CEO Bob Iger said he had spoken with Peltz on the phone but had no specifics on what the activist investor ultimately wants.
However, the managing director addressed the share price and said: “We do not manage the share price for short-term gains or on a short-term basis. “We have a long-term view and have spent the past year fixing things that needed fixing.” …The long-term outlook for Disney shareholders is quite bright.”
Iger said an integrated Hulu and Disney+ app will launch in March 2024 and that ESPN will move to streaming “no later than 2025.”
Bob Iger, CEO of The Walt Disney Company, arrives at the screening of the film ‘Indiana Jones and the Dial of Destiny’ during the 76th edition of the Cannes Film Festival on May 18, 2023 in Cannes, southern France. (LOIC VENANCE/AFP via Getty Images) (LOIC VENANCE via Getty Images)
The company is currently seeking strategic partners, either through a joint venture or partial ownership, to enable ESPN to launch a new direct-to-consumer (DTC) service.
ESPN posted operating profit of $953 in the quarter, up 15% from a year ago – driven primarily by its domestic business.
The company attributed higher ESPN domestic operating results to a decline in programming and production costs, growth in ESPN+ subscription revenue due to price increases and subscriber gains, a slight increase in advertising revenue and a decline in affiliate revenue due to the charter dispute in September.
Standalone linear network revenue continued to be challenging, falling 9% in the quarter, while domestic operating income fell 5% due to a particularly weak advertising market, mirroring competitors’ results. Disney said the Hollywood strikes were also to blame.
ESPN accounts for less than 60% of total linear network revenue, or about 30% of operating income.
Disney’s Experiences division, which includes parks, cruise lines and consumer products, saw revenue jump 13% year over year to $8.16 billion in the quarter. Operating income was $1.76 billion, below estimates of $1.87 billion but 30% higher than the fourth-quarter 2022 total income of $1.34 billion.
The company said lower results at its domestic parks and resorts were due to a decline at Walt Disney World Resort due to inflation and lower guest spending.
Disney plans to invest $60 billion in its theme park business over the next decade. Most of the full-year 2024 domestic park growth will occur in the second half of the year, the company said.
Alexandra Canal is a senior reporter at Yahoo Finance. Follow her on Twitter @allie_canalLinkedIn and email her at [email protected].
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