The Walt Disney Company (DIS) on Q4 2021 Results - Earnings Call Transcript
Operator: Thank you for standing by and welcome to the Walt Disney Company's Fiscal Full Year and Fourth Quarter 2021 Financial Results. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Tammy Munsey, Vice President of Investor Relations. Please go ahead. Tammy Munsey: Good afternoon. It's my pleasure to welcome everyone to the Walt Disney Company's fourth quarter 2021 earnings call. Our press release was issued about 25 minutes ago and is available on our website at www. disney. com/investors. Today's call is also being webcast and we'll post a transcript of this call to our website. Joining me remotely today are Bob Chapek, Disney's Chief Executive Officer, and Christine McCarthy, Senior Executive Vice President and Chief Financial Officer. Following comments from Bob and Christine, we'll of course, be happy to take some of your questions. So with that, let me turn the call over to Bob to get started. Bob Chapek: Thanks, Tammy, and good afternoon, everyone. As we close out the fourth quarter, I'm pleased to say that it's been a very productive year for The Walt Disney Company. As we've made great strides in reopening our business, while also taking meaningful and innovative steps to position ourselves for continued long-term growth. Despite the many ongoing challenges of the pandemic, we ended the quarter with adjusted EPS of $0.37 compared to a loss of $0.20 last year. Christine will go more in-depth on the quarter and the coming year in her remarks. Last quarter, we talked about our strategic priorities for the future. And as we head into fiscal '22, we remain keenly focused on advancing them to drive our continued growth. First and foremost, telling the world's most original enduring stories. Second, maximizing the synergy of our unique ecosystem to deepen consumers' connection to our characters and our stories. And lastly, using the power of our far reaching platforms and new technologies to give consumers the best entertainment experience possible. I'll briefly talk about how we are executing against these priorities in 3 key areas: Direct-to-Consumer, sports, and Parks, Experiences, and Products. On the Direct-to-Consumer side, we are extremely pleased with the success of our portfolio streaming services. Disney+, ESPN+ and Hulu continue to perform incredibly well with a 118.1 million, 17.1 million, and 43.8 million subscribers, respectively, for a total of a 179 million subscriptions. To put this growth in perspective, in the past fiscal year alone, we have grown the total number of subscriptions across our DTC portfolio by 48%, and Disney+ subs in particular by 60%. I want to reiterate that we remain focused on managing our DTC business for the long-term, not quarter-to-quarter. And we're confident we are on the right trajectory to achieve the guidance that we provided at last year's Investors Day, reaching between 230 million and 260 million paid Disney+ subscribers globally by the end of fiscal year 2024, and with Disney+ achieving profitability that same year. This Friday, we will celebrate the 2-year anniversary of the launch of Disney+ with our first ever Disney+ Day of global, Company-wide celebration. We are enormously proud of all that we've accomplished with the service in just the first 2 years. It has exceeded our wildest expectations, and we are so excited for what's to come. With this in mind, we have numerous activations planned across the entire Company for Disney+ Day, including the streaming premiere of Marvel Shang-Chi and The Legend of the Ten Rings, which has already surpassed $430 million at the global box office. Other content coming to the service on Disney+ Day includes the highly anticipated Disney+ original movie, Home Sweet Home Alone, the epic adventure, Jungle Cruise, and a hilarious new short from The Simpsons, and the first 5 episodes of season 2 of the fantastic National Geographic series, The World According to Jeff Goldblum. And there's more great content in the pipeline. On the heels of Disney+ Day, we'll premiere 2 amazing new original series, Marvel's Hawkeye on November 24th, and the latest Star Wars adventure, The Book of Boba Fett on December 29th. And of course, we're extremely excited about the Thanksgiving holiday weekend debut of The Beatles: Get Back, Peter Jackson's highly anticipated 3-part documentary. Additionally, Marvel's Eternals, which has reached more than $161 million at the global box office in less than a week and Disney's Encanto, which premieres in theaters on November 24th, will come to the service after their exclusive theatrical runs. In total, we are nearly doubling the amount of original content from our marquee brands, Disney, Marvel, Pixar, Star Wars, and National Geographic coming to Disney+ in FY '22, with the majority of our highly anticipated titles arriving July through September. This represents the beginning of the surge of new content shared last December at our investor conference 2.0. We recognize that the single most effective way to grow our streaming platforms worldwide is with great content. And we are singularly focused on making new, high-quality entertainment, including local and regional content that we believe will resonate with audiences. Of note, we have 340 plus local original titles in various stages of development and production for our DTC platforms over the next few years. As you know, we announced at our last Investor Day that we expect our total content expense to be between $8 and $9 billion in fiscal 2024, and we will now be increasing that investment further with the primary driver being more local and regional content. We are expanding our global reach by introducing Disney+ in additional markets around the world. The service is now available throughout Japan and we're thrilled to be launching it this Friday on Disney+ Day in South Korea, in Taiwan, and in Hong Kong on November 16. In just 2 short years, we're now in over 60 countries and more than 20 languages. And next year, we plan to bring Disney+ to consumers in 50 plus additional countries, including in Central, Eastern Europe, The Middle East, and South Africa. Our goal is to more than double the number of countries we are currently in to over 160 by fiscal year '23. Turning to Sports, we continue to build out ESPN+ with exclusive sports content that makes our DTC offering the perfect complement to the ESPN linear experience. And with every new sports rights deal, we have considered both linear and DTC. In fact, all 7 of the major deals we made in the last year-and-a-half included a streaming component. Among them is our historic 10-year NFL rights agreement, which begins in 2023. We also recently signed a 5-year deal with the league for Monday night Wild Card game, which runs through 2025. Another example is our 7-year rights deal with the NHL, 75 of the League's live national games are and will be available exclusively on ESPN+ and Hulu. And ESPN+ is the sole home for more than 1,000 out-of-market NHL games. By the way, this is another reason that Disney Bundle is proving highly appealing to consumers. Because live sports are key element, and a key differentiator of our Disney ecosystem. Some 90% of the most-watched telecast last year were sports, and they continue to perform extremely well. For example, the NHL's opening night games on ESPN last month marked the highest viewed season opening doubleheader on record, with an increase of 54% over the 2019/2020 season opening day letter. And we are particularly pleased with the NHL 's Direct-to-Consumer performance on ESPN+ and Hulu. Likewise, the hugely popular UFC, fresh off a strong card at Madison Square Garden last weekend, continues to be a top performer for ESPN+ with 6 of the top UFC on ESPN+ pay-per-views coming in the past year. At the same time, we continue to expand our original sports programming with innovative broadcast like the hugely popular Monday Night Football with Peyton and Eli, which airs on ESPN2, and reached 1.9 million viewers by its second week, as well as the highly anticipated new shows like Man in the Arena: Tom Brady, the multi-part docuseries about the legendary quarterback premiering on ESPN+ on November 16, along with a host of fantastic new social and digital shows and podcast. We're also moving towards a greater presence in online sports betting. And given our reaching scale, we have the potential to partner with third-parties in this space in a very meaningful way. Suffice to say, we continue to see enormous opportunity in sports, and all of this, the right steels, our innovative programming, and the flexibility achieved through our DTC business, which saw ESPN+ subscribers, increased by 66% over the past fiscal year alone. All of this is a testament to the clear ambition we have in sports. One of the things that sets The Walt Disney Company apart is our unique access to an incredible number of consumer touch points across our businesses. That, of course, includes our parks and resorts, where we've achieved a number of important milestones since our last earnings call, including the first full quarter since the pandemic began with all of our Parks around the world open to guests, albeit with some limits on capacity, and the return of our entire Disney Cruise Line. At the same time, the U.S. government's approval of vaccines for 5 to 11-year-olds, and the reopening of borders to fully vaccinated international travelers are both important steps towards the recovery of our business. But what is perhaps most exciting is the work that we have done during the time our Parks were closed to re-engineer and re-imagine the guest experience. We have introduced a number of exciting new offerings that enable guests to create their best Disney Day. In late August, Disneyland Resort launched Magic Key, the new annual membership program that is resonating strongly with Legacy Annual Passholders, while also attracting new passholders. In fact, about 40% of current sales are to new passholders. And most Magic Key holders have purchased the top 2 tiers, Dream Key and Believe Key. With Dream Key selling out in just 2 months. We're also seeing a great response to the new Annual Passholder program at Walt Disney World. A testament to the demand for our in-park experiences and the success of our yield management strategy. Walt Disney World rolled out its new multi-tiered full service app, Disney Genie, which allows guests to easily and efficiently navigate everything our parks have to offer in order to have the best experience possible. The response to the service in just its first month has been extremely positive. The majority of Genie and Genie+ users have said it improved their overall park experience with nearly 1/3 of park guests upgrading to Genie+, making it possible for them to spend less time waiting in line and more time enjoying attractions, entertainment, dining, and retail opportunities. We are very encouraged by what we're seeing and look forward to launching Disney Genie at Disneyland very soon. Alongside these transformative programs, we continue to invest in our parks and resorts themselves. We introduced a host of new attractions as part of Walt Disney World's 50th anniversary celebration, which kicked off on October 1st. These include Remy's Ratatouille Adventure at EPCOT, which has quickly become one of the parks top attractions, our new themed restaurant SPACE 220, and Two New Nighttime Spectaculars. And there is lots more in store in the coming month, including the highly anticipated indoor coaster Guardians of the Galaxy: Cosmic Rewind, and the one-of-a-kind Galactic Starcruiser experience. As part of this immersive 2-night adventure, guests will become heroes of their own Star Wars stories. Reservations went on sale just 3 weeks ago, and the first 4 months of voyages have virtually sold out for this premium experience. Disney Cruise Line continues to be one of the highest rated guest experiences of any of our offerings. As I said earlier, all 4 of our ships are now sailing and we continue to see tremendous demand for the incredible experiences we offer at sea. We are thrilled to be launching a new ship, the Disney Wish in June of 2022 and will welcome her sister ships to the fleet in 2024 and 2025. Combined, these 3 vessels will help increase capacity and our footprint in a business that has historically generated a double-digit return on investment, driven by a premium price might well above the industry average. Before leaving our Parks and Experiences, I want to mention the continued transformation of our Consumer Products business. We have almost completed the reduction of our physical footprint, which will enable us to pivot our approach with a focus on our e-commerce platform, shopDisney, and on more compelling retail partnerships, such as Disney Store at Target, which will triple its locations by the end of the year. In short, our parks around the globe now have more to offer guests than ever before, with our new offerings and we're making it even easier for them to have the best time imaginable, tailored specifically to their individual needs and preferences in a way, only Disney can. Our Company is truly unique and that we have a significant presence in the physical world through our parks and resorts, as well as media entertainment assets in the digital world. And it is incredible to see how our use of our emerging technology and insights gained through our innumerable consumer touch points, is enabling us to transform the way people interact with and experience our stories and products in both worlds. The Walt Disney Company has a long track record as an early adopter in the use of technology to enhance the entertainment experience. Steamboat Willie, the first cartoon with synchronize sound, our groundbreaking development and use of Audio-Animatronics, we were the first to distribute downloaded content on the new Apple iPod back in 2005, Pixar has been a pioneer in computer animation, these are just a few examples. Suffice it to say, our efforts to-date are merely a prologue to a time when we'll be able to connect the physical and digital worlds even more closely, allowing for storytelling without boundaries in our own Disney metaverse. And we look forward to creating unparalleled opportunities for consumers to experience everything Disney has to offer across our products and platforms wherever the consumer may be. As we look ahead to this next frontier, given our unique combination of brands, franchises, physical and digital experiences, and global reach, we see limitless potential, and that makes as excited as ever about The Walt Disney Company's next 100 years. With that, I'll turn it over to Christine, and she'll talk in greater detail about the quarter and the year ahead. Christine Mccarthy: Thank you, Bob. And good afternoon, everyone. Excluding certain items, diluted earnings per share for the fourth fiscal quarter was $0.37, an increase of $0.57 from the prior year quarter. For the full fiscal 2021 year, diluted EPS excluding certain items was $2.29, or an increase of $0.27 versus the prior year. As a reminder, these results take into account that fiscal 2020 was a 53-week year compared to our usual 52-week year in 2021. We estimate that the additional week in 2020 resulted in a benefit to pre -tax income of approximately $200 million, primarily at the Media and Entertainment Distribution segment, creating an unfavorable comparison for fiscal year '21. I'll now turn to our results in the quarter by segment, beginning with Parks, Experiences, and Products where fourth quarter operating income increased by $1.6 billion year-over-year. A profitable fourth quarter at Parks and Experiences reflects our ongoing recovery from the COVID-19 pandemic. All of our sites were open for the entire quarter, although generally at reduced capacities. In the prior-year quarter, Shanghai Disney Resort was open for the entire quarter, while Disney World Resort and Disneyland Paris were open for approximately 12 weeks. Hong Kong Disneyland Resort was open for approximately 4 weeks. And Disneyland Resort was closed for the entire quarter. Attendance trends continued to strengthen at our domestic parks, with Walt Disney World Q4 attendance up double-digits versus Q3, and Disneyland attendance continuing to strengthen significantly from its reopening in the third quarter. Guest spending at our domestic parks also continued its strong trend, with per cap in the fourth quarter up nearly 30% versus fiscal 2019. Our forward-looking demand pipeline for domestic guests at Walt Disney World and Disneyland Resort remains strong, demonstrating our brand strength, as well as more normalized consumer behavior. Additionally, we're looking forward to the return of international attendance at our domestic parks and resorts. However, keep in mind that due to longer vacation planning lead times, we don't expect to see a substantial recovery in international attendance at our domestic parks until towards the end of fiscal 2022. At our cruise line business, as Bob mentioned earlier, our entire fleet has returned to sea with guest ratings as strong as pre -pandemic levels despite new health and safety protocols. While we expect social distancing restrictions on our ships to remain in place for at least the first half of fiscal 2022, booked occupancy on our ships for the second half of the year is already ahead of historical ranges at significantly higher pricing. And we are excited for the Disney Wish to set sail in June 2022, with the inaugural season already nearly 90% booked. At consumer products, year-over-year operating results declined in the fourth quarter, impacted by a tough comparison in our games business due to the prior year performance of 2 titles, Marvel's Avengers and Twisted Wonderland. Turning to our Media and Entertainment Distribution segment, fourth quarter operating income decreased by approximately $600 million versus the prior year driven by lower results at Linear Networks, Direct-to-Consumer and content sales, licensing, and other. At Linear Networks, you may recall that we guided to a decline in Q4 operating income versus prior year. Operating results at Linear Networks did decrease year-over-year by approximately $200 million driven by a decrease at our domestic channels, partially offset by an improvement at our international channels. At our domestic channels, both broadcasting and cable operating income decreased in the fourth quarter versus the prior year. Lower results of broadcasting were driven by lower results at ABC and the owned television stations. At ABC, the decrease was primarily driven by higher marketing and programming and production costs, reflecting a higher number of series versus the prior year due to last year's production delays as we noted in the guidance we gave last quarter, partially offset by higher affiliate revenue. The decrease at the owned television stations was due to lower advertising revenue, reflecting comparisons to the 53rd week and stronger political advertising in the prior year. At Cable, the year-over-year decrease in operating income was primarily driven by 3 factors. 1. Lower affiliate revenue, primarily driven by the prior-year benefit of the 53rd week. 2. An increase in marketing cost for more titles premiering in the current quarter, which we also discussed last quarter. And finally, to a lesser extent, lower advertising revenue. These impacts were partially offset by lower programming and production costs, which generally reflect COVID-19 related timing impacts from the prior year. Cost decreased for the NBA and MLB programming versus the prior year, partially offset by increased cost for college football games. Domestic Linear Networks advertising revenue decreased in Q4 versus the prior year, driven by our Cable networks and owned television stations. Both of which were impacted by the prior-year benefit of the 53rd week. ESPN advertising revenue in the fourth quarter was comparable to the prior year, as higher rates were offset by the prior-year benefit of the 53rd week. First quarter to date, domestic cash advertising revenue at ESPN is currently pacing above the prior year, benefiting from increased ratings for college football and the NFL. Total domestic affiliate revenue decreased by 6% in the quarter. This was driven by a benefit of 6 points of growth from higher rates, offset by a 7 point decline due to the 53rd week adjustment and a 3 point decline due to a decrease in subscribers. International channel results increased versus the prior year driven by lower programming and production costs and higher advertising revenue, partially offset by lower affiliate revenue. At Direct-to-Consumer, our fourth quarter operating results decreased by $256 million year-over-year, driven by higher losses at Disney+ and ESPN+, partially offset by improved results at Hulu. At Disney+, the higher loss versus the prior-year quarter was driven by higher programming, marketing, and technology costs. These higher costs were partially offset by increases in Subscription and Premier Access revenue. Higher Subscription revenue reflects subscriber growth, and increases in retail pricing. And the increases in costs reflect the ongoing expansion of Disney+. Higher Premier Access revenue was driven by Black Widow and Jungle Cruise in Q4 compared to Mulan in the prior-year quarter. As Bob mentioned earlier, we ended the fourth quarter and the fiscal year with over 118 million global paid Disney+ subscribers, reflecting over 2 million net additions from Q3 in line with the subscriber guidance we gave in September. Subscribers across our domestic and core international markets, excluding Disney+ Hotstar grew by almost 4 million from Q3 to Q4. Disney+ Hotstar subs decreased versus the prior quarter and accounted for about 37% of our total Disney+ paid subscriber base as of the end of the fourth quarter. Disney+ 's global ARPU in the fourth quarter was $4.12. Excluding Disney+ Hotstar, it was $6.24 or an increase of about $0.12 versus the third quarter continuing to benefit from recent price increases. At ESPN+ where we ended the fourth quarter with over 17 million subscribers versus nearly 15 million in Q3, the decrease in operating results year-over-year was driven by higher marketing and sports programming costs, partially offset by subscription revenue growth. And at Hulu, higher operating results in the fourth quarter versus the prior year were due to subscription revenue growth, and higher advertising revenue, partially offset by increases in programming, and to a lesser extent, marketing costs. Hulu ended the fourth quarter with 43.8 million paid subscribers, inclusive of the Hulu Live digital MVPD service. Hulu Live subscribers increased to 4 million from 3.7 million at the end of the third quarter. Moving on to Content Sales, Licensing, and Other, results decreased in the fourth quarter versus the prior year to an operating loss of $65 million, driven by lower theatrical and TV/SVOD distribution results, both of which we noted as drivers in the guidance we gave during the last earnings call. While theaters have generally reopened, we are still experiencing a prolonged and gradual pace of recovery in this business. Lower theatrical results were driven by higher operating losses from more titles and release, as well as higher marketing expenses for future releases. Lower TV/SVOD results were due to lower third-party content licensing of film content, driven by the ongoing impact of COVID, as well as our strategic shift towards distribution on our DTC services, partially offset by higher income from sales of episodic content due to lower write-offs versus the prior year. To conclude, as we progress into fiscal 2022 and beyond, there are a number of items I would like to mention. Our capital expenditures in fiscal 2021 were $3.6 billion or approximately $400 million lower than our fiscal 2020 CapEx of $4 billion. CapEx for the year came in lower than the previous guidance we gave primarily due to spending delays across the enterprise. For fiscal 2022, we expect CapEx to increase by $2.5 billion versus 2021, driven by the delivery of the Disney Wish, as well as other increased spending at DPEP incorporate. At DPEP, we expect that per cap spending at our domestic Parks in fiscal 2022 will continue to significantly exceed pre -pandemic levels, and we are particularly encouraged by the early response we are seeing to Genie at Walt Disney World. However, we also expect that while we continue to pursue strong cost mitigation efforts, certain costs will be elevated in fiscal '22 versus pre -pandemic levels, including for example, inflationary pressure on wages, costs related to new projects and initiatives such as Star Wars: Galaxy's Edge, Avengers Campus, and the EPCOT expansion and a ramp up of expenses in support of our cruise ship expansion. And as we think about fiscal '22 results at DMED, there are few things worth noting. First, we are excited about the 9 theatrical releases we have slated for the first quarter of fiscal '22. However, we expect that the prolonged recovery we're seeing in the theatrical market, paired with the marketing costs associated with each release may adversely impact theatrical operating results in the first quarter by approximately $300 million versus the prior-year quarter, which had only 2 releases. At Linear Networks, we expect that first quarter operating income will decrease by nearly $500 million versus the prior year. Reflecting factors including higher contractual sports rights costs for college football and the NFL. Timing of cricket expenses at Star India an adverse comparison to the prior year's political advertising revenue. Finally as it relates to our expectations for Disney+. Looking at fiscal '22, we are thrilled about the quality of the content coming in the first 3 quarters of the year. But we will not yet be at our anticipated steady-state cadence of content releases. The fourth quarter will likely be more indicative of what our slate could look like once we have content flowing steadily from all of our industry-leading creative engines. Q4 will be the first time in Disney+ history that we plan to release original content throughout the quarter from Disney, Marvel, Star Wars, Pixar, and Nat Geo all in one quarter. This include highly anticipated titles such as Ms. Marvel, Andor, and Pinocchio. And as Bob mentioned earlier, we are also increasing our local content offerings in Asia, India, Europe, and Latin America in fiscal 2022, with the majority of those titles also releasing in the back part of the year. As we've discussed before, we don't anticipate that sub-growth will necessarily be linear from quarter-to-quarter. So putting this all together and also taking into consideration the timing of our planned international launches in 2022, we expect Disney+ subscriber net adds in the second half of fiscal 2022 will be meaningfully higher than the first half of the year. Additionally, we now expect the Disney+ will reach its peak year of losses in fiscal 2022 instead of in fiscal 2021, as better-than-expected revenue and lower content expenses due to production delays contributed to lower-than-expected losses in 2021. As Bob mentioned, we are increasing our overall long-term content expense for Disney+. And we believe we are well-positioned to achieve the subscriber target of 230 million to 260 million by fiscal 2024 that we laid out at last year's Investor Day. And we also remain confident in our expectations that Disney+ will achieve profitability in fiscal 2024. And with that, I'll now turn the call back over to Tammy, and we would be happy to take your questions. Tammy Munsey: Thanks, Christine. As we transition to the Q&A, let me know that since we are not physically together this afternoon, I will do my best to moderate the Q&A by directing your questions to the appropriate executive. And with that Jonathan, we're ready for the first question. Operator: Certainly. Our first question comes from the line of Ben Swinburne from Morgan Stanley. Your question, please? Ben Swinburne: Thanks. Good afternoon. Bob or -- and/or Christine. I think there's 2 areas where expectations have probably been out of line with reality this year, that's a on the stock. One of them is the Disney+ net adds, the other is probably more recently on Parks margins and you talked a lot about both of those in your prepared remarks. But maybe you could just spend a minute, on both topics. On Disney+, it sounds like we should think about net-adds being higher in 23 and 24 than in 22 based on the surge that I think you mentioned, Bob, on the programming side. So I'm wondering if you could help us with that. I think that would help set the expectations in the right spot. And then on the Parks front. Bob, you talked a lot about Parks margins, when you get back to prior peak revenues being at or maybe even higher than before, but obviously there is also not a linear ramp on the margin front either. So if you could talk a little bit about how expenses come back into the business over the course of time as it recovers relative to revenue, so we make sure we're thinking about that business the right way in this set of unusual circumstance coming out of a pandemic. Thank you. Tammy Munsey: Bob, why don't you start off with Disney+ net ads, and Parks as well. And then Christine, maybe you can chime in on the expenses for Parks? Bob Chapek: Okay. Thank you, Ben. On the Disney+ side, as Christine had said, we're real pleased with where we're sitting. But again, it's not going to be a linear rate quarter to quarter. I think the recovery that you mentioned in terms of getting the growth rate back up to where it's been historically, is really going to come in the third and the fourth quarters. The third quarter will be powered, not necessarily by the content, but by the number of ads that we have in terms of markets. Our number of markets that we're going to add will essentially double to more than 160 by FY2023, and that will propel us in the third quarter. And the fourth quarter will be more of a function of that. Finally, the dam will break in terms of the content that we announced last December that will be substantial, and will lead to a cadence of content throughout the quarter that will look more like what we expect to see from an ongoing standpoint. Obviously, we're only in year 2 of the Disney+ launch, and the hunger for content, for the service is extraordinary. And when you have that happen at the same time that you have a pandemic, and you have to shut down production. That's not a good combination. And yet we identified the need for the content way-back exactly a year ago, and have prepared a very strong cadence of content which will now hit the pipeline in the second half of this year. In terms of the park situation, we are very bullish. We're seeing incredible 30% increases in per caps, as I think was referenced in the earnings letter. And so we're not only seeing strong demand, but it's at per caps that are much higher than we've traditionally seen. There was a reference and I am not sure if everyone appreciates the gravity of this to the Genie+ success, 1/3 of our guests at Walt Disney World, are buying the Genie+ upgrade at $15, that's per guest, per day. And that is a very, very material increase for in per-caps, but also in margins. So we're very bullish about both our Disney+ business, both in terms of of guidance that has been given today. But additionally, in terms of where our Parks business is going to go from a demand standpoint once we completely clear the pandemic, but also in terms of the what we expect to be a long lasting benefits in terms of yields. Christine? Christine Mccarthy: Thanks, Bob. And thanks, Ben. I'm glad you asked the question on Parks expenses. And I know you know this business well, but just for the benefit of some others that maybe newer to following Disney. Let's remember that the Parks expenses are in 3 buckets, fixed, which is quite substantial, semi-fixed, and variable. So variable was where we were really able to make some adjustments during COVID. But the other fixed and semi-fixed buckets are ones that we have to carry on regardless of the operating environment that we found ourselves in. So as we come back online, we've also done a lot of work on fundamentally changing some of the ways we've have done business on both the revenue side and the cost side to optimize margins. What you see this fourth quarter is an overall margin for the global business, for DPEP, a little under 12%, and that's well below our pre - COVID levels. I've said this before and I'll say it again, that I believe that we will get not only back too, but have high probability of exceeding those previous margin levels in our parks because of some of the things we've done. We're using date-based pricing. We're strategically managing attendance. We do have some promotional offers that are really meant to balance yield with the demand, given capacity on any given day or week during the year. And on the cost efficiency side, we really made some improvements, not only to the cost side, but also that improves the guest experience. So those are things like the mobile food ordering that we have, a lot of people who have been to our parks since we reopened really enjoyed that. There's contactless check-ins at our hotels; lots of people enjoy that as well. We have virtual queues for selected attractions, and we're once again really looking at even physical park improvements that allow for better guests movement throughout the Parks. So while these margins will remain impacted, while we are still operating under capacity constraints, again, we believe over the long term that these fundamental changes are going to yield -- are going to result in higher margins overall. So thanks for asking that question. And the other thing I would say is, Bob mentioned, Genie. Genie we have launched in Walt Disney World. We have not yet launched it in Disneyland. And I think when we have that exposure to the Disneyland, people who come to visit Disneyland -- the response will be as strong if not stronger. Thanks. Ben Swinburne: Thank you both. Tammy Munsey: Thank you, Ben. Next question, please. Operator: The next question comes from the line of Alexia Quadrani from JPMorgan. Your question, please. Alexia Quadrani: Thank you. Just a few questions if I may. First, ARPU on Hotstar is obviously lower than core Disney+ jobs. I'm curious if you could elaborate on the opportunity to narrow that gap over time and does it eventually become profitable contributor and maybe how much investment is needed in a big picture in that property? And then just my follow-up question is on the -- your decision to revert back to include the Asheboro releases, at least for now, it looks like even though they might be lost incurring initially, why do you ultimately feel that's a better model? Was it piracy, any color there? Thank you. Tammy Munsey: Bob why don't you start with exclusive theatrical releases and then Christine can talk about Hotstar ARPU? Bob Chapek: Okay. As you know, we have preached flexibility in terms of making decisions on distribution as we recover from the pandemic and in the mix of changing consumer behaviors. The extent to which we had a number of titles release going to theatrical will eventually go to Disney+, but what we're seeing is some recovery of the theatrical exhibition marketplace, which is a good thing by the way, for not only Disney but also for the industry, and because most of the franchises that we've had as Walt Disney Company have been built through the theatrical exhibition channel of distribution. At the same time, we're watching very, very carefully different types of movies to see how the different components of the demographics of that market come back. And we're watching very carefully our family films, as they are released over the next couple of months to make sure that that market will come back to theatrical exhibition as the general entertainment with say the films that appeal to a younger target audience have come back. And so we're sticking with our plan of flexibility, because we're still unsure in terms of how the marketplace is going to react when family films come back with a theatrical first window. I should say that -- you'll notice that the films that we are putting into the marketplace, in theatrical that are family films have a fairly short window, at least in terms of any reference point to what history might have been. And we're doing that so that we can get our films quicker to Disney+ and -- but at the same time see if the theatrical market can kick back into full gear as we prime the pump with these films. But we're going to do what's best for our shareholders ultimately. And we don't announce our films that far in advance, like we used to because we know that we're in a time of flux and change still. And while COVID will be in the rearview mirror, God-willing, I think changing consumer behavior is something that's going to be more permanent. And so we're reading that on a weekly basis and make our decisions going forward accordingly. Christine Mccarthy: Thanks, Alexia, for your question on Hotstar ARPU. Just to make something very clear, the Disney+ Hotstar is included in our overall Disney+ guidance that we reiterate to be profitable in 2024. So I just want to make sure that everyone understands that. But as it relates to ARPU specifically, there's been a lot of noise in the Indian market, a lot of which has been around sport. So when you look at the ARPU for Hotstar on a linked quarter basis from Q3 to Q4 this year, it actually decreased, and that was a result of lower per sub advertising revenue because there were fewer IPL matches this year. In Q4, there were only 18, and I believe the number was 29-ish in Q3. So you had a linked-quarter reduction in games, therefore lower subscriber advertising revenue. And when we think about ARPU overall, there's several levers here. There is a price value relationship over time, high-quality content. And the content in India is really 2 things. It's not only the IPL, but other key sports like Beyond Cricket. So you have things like the English Premier League and . And also there's a big general entertainment component. We have all of our Disney+ content over there for all the different labels that we have, Disney Pixar, Marvel, Star Wars, and so on. But they also have over 18,000 hours of original local programming that is produced every year. So once again, I think the upside potential as when all things are working, also cylinders are working and we'll be able to take price up as the market allows. Tammy Munsey: Thank you. Thank you, Alexia. Next question, please. Operator: Our next question comes from the line of Michael Nathanson from MoffettNathanson. Your question, please. Michael Nathanson: Thanks. Hey, Tammy. I have 2. One is I appreciate your view that the content side would get better, and it will drive some growth. But I really want to focus on the U.S. What gives you confidence that that's what is the reason for the slowing growth. Are there any cohorts, any demographics that you're underpenetrated. And perhaps the widening out of content is an issue versus just more new content. That's 1. And then 2 is we have covered Disney a long time, but I've never seen this much inflation before, and I don't think any of us have in 30 years. I wonder how will you mitigate that inflation, and at what point it would start becoming a meaningful drag on the margin recovery that you identified. Thanks. Tammy Munsey: Thank you, Michael. Bob, how about if you talk about the Disney+ sub grows in the U.S. and Christine can talk about inflation? Bob Chapek: So Michael, your first question was about the of the supply chain of new content coming into the service and its impact on our net sub adds. As you can probably suspect, in a world of to Direct-to-Consumer, we have a lot of information, a lot of data, and we have a pretty good idea of what the marginal impact of a particular title might be to our service, and we always say that library titles tend to increase engagement and minimize churn. But new titles, new content, whether the movies or series, add -- actually add new subs. And that is actually the reason why we're pretty confident that the increase in content flow towards the second half of fiscal '22 will actually lead to the types of results that we're anticipating. And so we've got some pretty good data that suggests that that is the case, given our history. While we only have two years, that two years has represented a number of titles, and you can start to build models as I'm sure you can understand. Every time that we have a title, we have a pretty good idea of what the net impact that that's going to be, both from a retention and to an addition standpoint. So we're pretty confident that once we get to more of a normal content flow in the second half of the year that some of the vacuum that we've had over the last couple of months will not be the case. Christine, you want to handle the -- oh, and Charlie there was also a question about Cohorts widening. I'll handle that one as well. It is true that Disney+ is a 4 quadrant service. And as such, we need content that's going to be broad in order to appeal to each of those demographics. If there is an opportunity that we're working on right now, it's our preschool area. We believe that there's an opportunity for us to sort of assert ourselves in the Direct-to-Consumer way the same way we did in the Linear Networks with Disney Channel. So that would be the biggest opportunity. And I can tell you that in sitting through our creator of reviews, the new content that we've got, the new storytelling that we've got in the area of preschool is absolutely extraordinary. And I think we're going to see a resurgence of Disney in that area in terms of content that's really going to become of the cultural zeitgeist, and then drive our subs amongst that particular cohort of potential sub-adds for Disney+. But it is true that being a 4-quadrant service, we need to be broad in our approach. And that's why we fired up the engines, the production engines of our Fox teams that we gotten in acquisitions Searchlight, and just our general -- Disney General Entertainment team making content both for Hulu and for Disney+, as well as our services internationally. Christine? Christine Mccarthy: Thanks, Bob. Hi, Michael. I think you asked a question that's on the minds of every CFO and every senior management team of companies out there. Inflationary pressures are something we are all looking at and trying to assess, and think about how do we manage through it. This is also one that -- I just mentioned, we've already experienced in some parts of our business. So over the past year or so, we've talked about the increase in the price of content. You see the content, that because of just the competition for talent for everything that's involved in productions, content costs have gone up. Where we see it directly in our parks business is primarily through the hourly wage inflation that we've seen through contact -- contract renegotiation in our commitment to paying our park workers well. And then we have things on the cost of goods side and it's interesting -- just last week maybe it was -- just last week I was talking to our Parks Senior Team about things we could do there, and there are lots of things that are worth talking about. We can adjust suppliers, we can substitute products, we can cut portion size which is probably good for some people's waistlines. We can look at pricing where necessary, but we aren't going to go just straight up across an increased prices. We're really going to try to get the algorithm right to cut where we can and not necessarily do things the same way. As I mentioned, we're also using technology to reduce some of our operating costs, and that gives us a little bit of headroom also to absorb some inflation. But we're really trying to use our heads here to come up with a way to kind of mitigate some of these challenges that we have. It's a great question, and I'm sure it's one that you could ask every single Company in your coverage universe. Thanks. Michael Nathanson: Thanks. Tammy Munsey: Thank you Michael. Operator, we have time for one more question. Operator: Certainly. Our final question for today then comes from the line of Jessica Reif Ehrlich from Bank of America Securities. Your question, please. Jessica Reif Ehrlich: Thank you. 2 of course. First, could you talk about the advertising outlook? There's a lot of moving pieces here between strong upfront, good sports ratings, but supply chain issues affecting some categories. And within advertising, if you could talk a little bit more about Hulu advertising, what's going on there with your aired light service versus pure premium subscription. And then the second question is -- I know Bob mentioned in prepared remarks -- sports betting. Can you frame or give us any color on the opportunity? Obviously, it's an area of growth as more states are approving it and it effects advertising, which should be good for the stations. But how can you participate in a bigger way while still protecting the ESPN brand? Tammy Munsey: Thank you, Jessica. Bob, why don't you address sports betting and Christine can talk about advertising. Bob Chapek: Okay. Will do. Jessica, you're right. We do believe that sports betting is a very significant opportunity for the Company, and it's all driven by the consumer. It's driven by the consumer, particularly the younger consumer that will replenish the sports fans over time and their desire to have gambling as part of their sports experience. It's not necessarily a lean-back, it's a little bit of a lean-forward type experience that they're looking for. And as we follow the consumer, we necessarily have to seriously consider getting into gambling in a bigger way. And ESPN is a perfect platform for this. We have done substantial research in terms of the impact to not only to ESPN brand, but the Disney brand in terms of consumers changing perceptions of the acceptability of gambling. And what we're finding is that there's a very significant isolation. Gambling does not have the cache now that it had, say 10 or 20 years ago. And we have some concerns as a Company about our ability to get in it without having a brand withdrawal. But I can tell you that given all the research that we've done recently, that that is not the case. It actually strengthens the brand of ESPN when you have a betting component, and it has no impact on the Disney brand. Therefore, to go after that demographic opportunity plus the, of course, not insignificant revenue implications, that is something that we're keenly interested in and are pursuing aggressively. Christine Mccarthy: Okay. I'll take the advertising question, Jessica. So overall, the ad market is strong across our entire DMED portfolio. And the sports market is strong, and it's really being driven by football at both the college and professional level, NHL and the NBA. We are seeing some impact from supply chain issues impacting certain sales categories than the 2 that I would just call out are autos in technology and those are for obvious reasons that we all know about, the chip shortage. On Hulu specifically, we're really pleased with the advertising demand we've seen for Hulu. And we believe the overall addressable market in the U.S. market will continue to grow. Hulu, we believe also has some real strategic advantages in this space. We've got a great slate of premium content and we've developed the ability to use our data to offer that targeting advertising, that advertisers really desire. And we also have a purpose built and unified ad platform. I mentioned this last quarter, but that's really helped us grow in addressable advertising. So we'll continue to make investments in technologies that are going to allow us to continue to exploit this advertising that we see on Hulu. And it's automating the sales process with programmatic, and advertisers self-service channels that we think are really going to continue to show good growth. So we expect advertising to continue to be an important driver of Hulu revenues going forward. Thanks. Jessica Reif Ehrlich: Thank you. Tammy Munsey: Jessica, thanks for the question. I want to thank everyone for joining us today. Note that a reconciliation of non-GAAP measures that were referred to on this call to equivalent GAAP measures can be found on our investor relations website. Let me also remind you that certain statements on this call, including financial or statements about our plans, expectations, beliefs, or business prospects, and other statements that are not historical in nature may constitute forward-looking statements under the securities laws. We make these statements on the basis of our views and assumptions regarding future events and business performance at the time we make them, and we do not undertake any obligation to update these statements. Forward-looking statements are subject to a number of risks and uncertainties, and actual results may differ materially from the results expressed or implied in light of a variety of factors, including factors contained in our Annual Report on Form 10-K, quarterly reports on Form 10-Q, and in our other filings with the Securities and Exchange Commission. We want to thank everyone for joining us today. Hope you have a good rest of the day. Operator: Thank you for your participation in today's conference. This does concludes program. You may now disconnect. Good day.
The Walt Disney Company (NYSE: DIS) Faces Competitive Challenges and Opportunities
- Analysts have revised Disney's stock price targets downward due to challenges in the streaming segment and increased competition.
- Disney's recent earnings report exceeded expectations, with significant contributions from theme parks and the successful release of "Deadpool & Wolverine."
- Investors are closely monitoring Disney's performance in streaming services and theme parks, alongside macroeconomic factors that could impact consumer spending.
The Walt Disney Company (NYSE: DIS) is a global entertainment giant known for its iconic characters, theme parks, and media networks. It operates in various segments, including media networks, parks, experiences, and products, studio entertainment, and direct-to-consumer & international. Disney faces competition from companies like Netflix, Comcast, and Warner Bros. Discovery in the streaming and entertainment sectors.
Over the past year, analysts have revised their price targets for Disney's stock downward, reflecting a more cautious outlook. The average price target decreased from $120.63 a year ago to $95 last month. This shift may be influenced by challenges in Disney's streaming segment, where increased competition and rising content costs have pressured margins, as highlighted by recent news.
Despite these challenges, Disney's recent earnings report exceeded Wall Street's expectations, driven by strong ticket sales from the summer Marvel film "Deadpool & Wolverine." The company's revenues for the fourth quarter rose by 6% to $22.6 billion, and for the full fiscal year, revenues increased by 3% to $91.4 billion. Analyst Michael Nathanson from MoffettNathanson has set a price target of $150 for Disney, indicating a positive outlook.
Disney's theme parks are recovering post-pandemic, but the pace and sustainability of this recovery remain uncertain. Laura Martin from Needham emphasized on CNBC that Disney's parks could play a crucial role in its long-term success, despite current revenue declines. Investors are keen to see how Disney's various segments, including its parks and streaming services, perform in the upcoming earnings report.
Macroeconomic factors, such as inflation and interest rates, can impact consumer spending on entertainment and travel, affecting Disney's business segments. As Disney prepares to announce its fiscal fourth-quarter earnings, analysts anticipate earnings per share of $1.10 and revenues of $22.45 billion. Investors will be watching closely for growth in Disney's streaming services and any strategic announcements that could influence future price targets.
Raymond James Downgrades Disney to Market Perform, Highlights Challenges in Parks Division
Disney (NYSE:DIS) shares fell more than 1% intra-day today after Raymond James downgraded the company to Market Perform from Outperform, citing several challenges, particularly within the Parks division, that are likely to keep the stock in a range-bound pattern for the next 12 to 18 months.
Despite a recent 12% rebound in Disney’s stock, analysts are cautious about its near-term potential, noting that the company's Parks division faces slowing attendance and pricing power. Following a post-pandemic surge, demand has started to soften as consumers adjust to price increases implemented over the past four years.
Disney is also grappling with heightened competition, particularly with the upcoming launch of Universal's Epic Universe in Orlando next summer, which is expected to be a significant challenge in one of Disney's key markets.
Raymond James pointed to three specific issues impacting Disney’s parks: a diversion of attendance to the Paris Olympics, a typhoon temporarily closing Shanghai Disney, and a recent hurricane affecting Walt Disney World in Orlando. These disruptions have contributed to a more cautious outlook ahead of Disney’s fiscal fourth-quarter report.
The firm also acknowledged Disney’s strong position in the shift from linear TV to streaming, thanks to its ownership of two major streaming platforms and a leading intellectual property portfolio. However, they expressed concerns over the high costs involved in launching ESPN’s streaming service.
Additionally, while Disney's upcoming three new cruise ships, set to launch by the end of 2025, are expected to boost growth, Raymond James noted that the capital expenditures required will put pressure on the company’s free cash flow in the near term.
Seaport Global Upgrades Walt Disney to Buy, Sets Price Target at $108 Amid Improved Macroeconomic Outlook
Seaport Global Securities analysts upgraded Walt Disney (NYSE:DIS) to Buy from Neutral, setting a price target of $108 on the stock.
The analysts acknowledged a shift in their outlook on Disney, citing improved macroeconomic conditions and better prospects for the company. They previously downgraded Disney shares over concerns about flat attendance at the Parks division and declining operating income. Additionally, increased spending on the company's direct-to-consumer (DTC) platform had led them to lower profitability estimates for fiscal year 2025.
However, the analysts now see a brighter future for Disney, driven by a more favorable macroeconomic environment. They believe market sentiment is more accepting of the current state of Disney’s Parks demand and DTC business, which is showing signs of emerging profitability.
Although Parks data remains somewhat weak, the analysts view it as a temporary issue, while DTC's recent price hikes and paid-sharing initiatives could help drive growth in both average revenue per user (ARPU) and subscriber numbers.
Walt Disney Co. (NYSE: DIS) Faces Financial Complexities Despite Streaming Profit
- Walt Disney Co. (NYSE:DIS) has achieved profitability in its streaming service, marking a significant milestone.
- The company's stock was downgraded to Neutral from Buy by Seaport Global, reflecting skepticism about Disney's short-term financial prospects.
- Despite a substantial increase in free cash flow, Disney's financial performance shows declines in key metrics such as revenue growth and net income growth.
Walt Disney Co. (NYSE:DIS) has recently reached a significant achievement as its streaming service begins to generate profit, marking a pivotal moment for the company. Despite this progress, a report from 24/7 Wall St. Insights has cast a shadow over this success by labeling Disney as "still an awful stock." This stark assessment underscores the hurdles Disney faces in its bid to reshape investor perceptions and affirm the value of its stock. The entertainment behemoth's journey to profitability in its streaming segment is a key development, yet it seems to struggle in fully swaying market sentiment in its favor.
The recent downgrade of Disney's stock by Seaport Global to Neutral from Buy, as reported by TheFly, adds another layer of complexity to Disney's financial narrative. This adjustment, announced on Thursday, August 8, 2024, with the stock priced at $85.96, reflects growing skepticism among analysts about Disney's immediate financial prospects. This downgrade is particularly noteworthy as it suggests a recalibration of expectations, possibly due to the challenges highlighted in the financial performance metrics of the company.
Disney's financial health, as indicated by its recent performance, presents a mixed picture. The company has seen a decline in revenue growth by approximately 6.23% in the latest quarter, alongside a slight decrease in gross profit growth by about 0.64%. More concerning is the dramatic drop in net income growth by 101.05%, signaling a significant hit to profitability. These figures, coupled with a decrease in operating income growth by roughly 2.37% and a fall in asset growth by about 1.35%, paint a challenging financial landscape for Disney.
However, not all indicators are negative. Disney has reported a substantial increase in free cash flow growth by 171.67% and an improvement in operating cash flow growth by approximately 67.78%. These positive developments in cash flow metrics suggest that, despite the downturns in other areas, Disney is generating more cash from its operations, which is crucial for sustaining investments and potentially improving its financial standing in the long run. Yet, the decline in book value per share growth by about 1.57% and a decrease in debt growth by roughly 2.92% further complicate the financial outlook, indicating a nuanced and multifaceted financial health that investors need to consider.
In summary, while Disney's streaming service turning profitable is a noteworthy achievement, the broader financial challenges and the recent downgrade by Seaport Global underscore the complexities in Disney's path to convincing investors of its stock's value. The mixed financial performance, characterized by significant growth in cash flow but declines in other key metrics, highlights the intricate balance Disney must navigate to enhance its stock appeal and secure investor confidence in its long-term prospects.
Disney Beats Q3 Earnings Expectations but Warns of Softening Demand, Shares Drop 4%
Walt Disney (NYSE:DIS) reported third-quarter earnings that exceeded analyst predictions, fueled by robust performance in its Entertainment segment. However, shares dropped over 4% intra-day today as the company cautioned about weakening demand in its Experiences segment.
Adding to the pressure on Disney's stock, it was reported that Disney and Comcast remain in a dispute over the valuation of Hulu. Disney indicated it might need to pay up to $5 billion more to acquire NBCUniversal’s 33% stake in the streaming service.
Disney reported adjusted earnings per share of $1.39, surpassing the Street estimate of $1.20. Revenue for the quarter was $23.2 billion, slightly above the consensus estimate of $23.08 billion and representing a 4% year-over-year increase.
The Entertainment segment was particularly strong, with operating income nearly tripling year-over-year, driven by better results in Direct-to Consumer and Content Sales/Licensing. Significantly, Disney achieved profitability across its combined streaming businesses for the first time, one quarter ahead of its previous guidance.
Despite the overall positive results, Disney warned of softening consumer demand in its Experiences segment, which may affect the upcoming quarters. The company expects Q4 operating income in the Experiences segment to decline by mid-single digits compared to the previous year.
Disney has now adjusted its full-year EPS growth target to 30%, citing strong consolidated financial performance in the third quarter.
Goldman Sachs Sets Bullish Price Target for Disney
- Michael Ng from Goldman Sachs has set a bullish price target of $125 for Disney, indicating a potential upside of approximately 22.57%.
- Despite facing challenges in its streaming and linear TV segments, Disney's theme park division has shown robust performance post-COVID-19.
- Disney's stock has begun to recover, fueled by better-than-expected Q2 fiscal year 2024 results and a surprising operating profit in its streaming operations.
On June 24, 2024, Michael Ng from Goldman Sachs set a bullish price target of $125 for Disney (NYSE:DIS), indicating a potential upside of approximately 22.57% from its price at the time of the announcement, which was $101.98. This optimistic outlook was shared alongside the initiation of coverage on Disney, as detailed in a report available on TheFly. The report, titled "Disney initiated with a Buy at Goldman Sachs," highlights the reasons behind Goldman Sachs' positive stance on the company. Disney, a global entertainment giant, has been navigating through a series of challenges and opportunities across its diverse business segments, including its streaming services, theme parks, and traditional linear TV operations.
Disney's stock, with the ticker symbol DIS, is currently trading at approximately $102 per share, which is nearly half of its peak price of around $202 observed on March 8, 2021. This significant drop in stock price has been attributed to a variety of factors impacting the company. Among these, Disney's streaming business has faced challenges such as slowing subscriber growth and increased competition from other streaming services. Additionally, the company's linear TV segment has experienced a downturn, marked by reduced advertising income and a fall in affiliate revenues within the domestic market. Despite these challenges, Disney's theme park division has shown robust performance since reopening post-COVID-19, although the near-term outlook presents a mix of higher expected costs and a potential normalization in visitor numbers.
However, there has been a positive development as Disney's stock saw a recovery from its low of about $80 in October 2023. This rebound was fueled by better-than-expected results for the second quarter of the fiscal year 2024 and a surprising operating profit reported in its streaming operations during the same period. Over a broader timeline, Disney's stock has experienced a sharp decline of 45% from its early January 2021 levels of $180 to around $100 currently. This overview suggests that while Disney faces several challenges across its various business segments, there are also signs of recovery and potential growth, particularly in its streaming business as it approaches profitability.
The Walt Disney Company (DIS), listed on the NYSE, is currently trading at $101.98, experiencing a slight decrease of $0.29, which translates to a change of approximately -0.28%. Today, the stock fluctuated between a low of $101.91 and a high of $103.08. Over the past year, Disney's shares have seen a high of $123.74 and a low of $78.73. The company's market capitalization stands at about $185.91 billion, with a trading volume of 7,349,654 shares. This financial snapshot, combined with the broader context of Disney's operational challenges and successes, underscores the rationale behind Goldman Sachs' bullish outlook on the company. Despite the hurdles, Disney's strategic moves, especially in its streaming and theme park divisions, hint at a resilient comeback, aligning with Goldman Sachs' optimistic price target.
Disney Shares Drop 9% Despite Strong Q2 Results
Walt Disney (NYSE:DIS) announced fiscal second-quarter adjusted earnings per share of $1.21, surpassing Wall Street predictions. However, shares dropped more than 9% yesterday. Following a tough proxy battle earlier this year, Disney's executive team is focused on moving forward, with CEO Bob Iger at the helm of the company's turnaround efforts. Iger highlighted the success of these efforts, particularly noting a surprising operating profit of $47 million from its direct-to-consumer entertainment streaming service, which includes platforms like Disney+ and Hulu, alongside its vital parks business.
Disney raised its full-year earnings per share growth forecast to 25%, up from the previously projected 20%. While the direct-to-consumer segment may see softer results this quarter, Iger expects Disney's overall streaming business to achieve profitability by the fourth quarter, a key component of his strategy to improve the company's stock performance.
For this quarter, Disney reported a jump in group-wide revenues to $22.08 billion, up from $21.8 billion the previous year, and slightly below the consensus estimate of $22.1 billion.
