- Disney released its fiscal fourth-quarter results, revealing a blend of successes and challenges. The company’s earnings surpassed expectations, primarily fuelled by robust performances at ESPN+ and ongoing growth in its theme park segment. However, a dip in ad revenue, notably from Disney’s ABC Network and owned TV stations, tempered overall revenue growth, marking the second consecutive revenue miss for the entertainment giant – a situation not seen since early 2018.
- CEO Bob Iger had hinted at the possibility of selling TV assets, reflecting the dynamic nature of Disney’s strategic considerations in response to market trends. Despite these challenges, the company reported a net income of $264 million, or 14 cents per share, marking a substantial 63% increase compared to the previous year.
- One of the highlights was the addition of 7 million new core Disney+ subscribers in the quarter, bringing the total to 150.2 million users, including Hotstar. The streaming business also narrowed losses compared to the previous year, a testament to Disney’s commitment to the platform’s growth. Popular titles and new content, such as the Star Wars series “Ahsoka,” played a crucial role in this success.
- Adjusted earnings per share exceeded expectations at 82 cents, surpassing the anticipated 70 cents. However, the top-line revenue came in slightly below estimates at $21.24 billion, against an expected $21.33 billion. This discrepancy reflects the intricate balance Disney is navigating between its thriving streaming business and challenges in its traditional movie business, exacerbated by an actors’ strike and a decline in advertising revenue from its TV networks.
- Despite these hurdles, Disney is actively implementing a turnaround strategy. Cost reductions of $7.5 billion, driven by efficiencies, restructuring, and subscription growth in its streaming operations, are on track. The acquisition of Comcast’s 30% stake in Hulu for $8.61 billion aligns with Disney’s strategy to own 100% of its streaming operation, capitalizing on content and economies of scale as the entertainment industry shifts away from traditional cable TV models.
- The Parks division shone in the last quarter, with revenue increasing by 13% to $8.3 billion. The reopening of international parks like Shanghai and Hong Kong resorts, previously affected by the Covid pandemic, contributed to this growth. Disney plans to invest $60 billion over the next ten years to further expand its presence in this lucrative business segment.
- Looking forward, Disney is optimistic about its growth prospects. Iger highlighted the significant progress made over the past year and outlined the company’s focus on growth opportunities in streaming, digital sports platforms, and economies within its film studios. The company expects to achieve significant free cash flow growth in 2024, driven by Disney+ subscription price increases and the expansion of its theme park business.
- As a long-term investor in Disney, the company’s diversification and turnaround efforts appear to be gaining momentum under the leadership of Bob Iger and the guidance of a new and experienced CFO. I own the share for clients and recently added to offshore managed portfolio holdings as I am confident in this high-quality blue-chip company and its future prospects.
By Ron Klipin