Disney Stock Rises After Earnings Beat, Increases Cost-Cutting Plan By $2BN

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by Tyler Durden
Wednesday, Nov 08, 2023 - 09:15 PM

While Disney revenues for the quarter and year grew 5% and 7% compared to the prior-year quarter and prior year, respectively, they were below expectations at $21.2 billion ($21.4 billion est.) with only theSports segment outperforming.

  • Entertainment revenue $9.52 billion, estimate $9.77 billion

  • Sports revenue $3.91 billion, estimate $3.89 billion

  • Experiences revenue $8.16 billion, estimate $8.2 billion

On an operating income basis, Disney crushed it, up 86% YoY to $2.98 billion (estimate $2.62 billion)

  • Entertainment operating income $236 million, estimate $164.8 million

  • Sports operating income $981 million, estimate $840.5 million

  • Experiences operating income $1.76 billion, estimate $1.62 billion

However, earnings at the world’s largest entertainment company rose to 82c (beating expectations of 69c).

The first anniversary of Bob Iger's return as chief executive of the Walt Disney Company saw Disney+ subs beat expectations, rising 7 million to 150.2 million (exp 147.07 million)...

...but ESPN+ and Hulu subs and ARPUs both disappointed:

  • ESPN+ subscribers 26 million, estimate 26.3 million

  • Total Hulu subscribers 48.5 million, estimate 49.21 million

  • ESPN+ ARPU $5.34, estimate $5.63

  • Hulu SVOD ARPU $12.11, estimate $12.43

Additionally, subscriptions fell 7 per cent at Disney+ Hotstar, the group’s streaming service in India, where Iger is examining whether to sell stakes in its Disney Star businesses or potentially shed its entire holding.

However, on the bright side, losses in Disney’s streaming business, including ESPN+, narrowed to $387 million in the quarter, coming in better than Wall Street projected.

Disney announced a more ambitious plan for company-wide cost cuts and sharply narrowed losses in its streaming business, making progress in two areas that Iger has said are crucial to the company's future.

The entertainment giant said Wednesday in its earnings report that it is seeking $7.5 billion in annualized cost efficiencies, up from the $5.5 billion it targeted at the beginning of this year.

“Our results this quarter reflect the significant progress we’ve made over the past year,” said Robert A. Iger, Chief Executive Officer, The Walt Disney Company.

While we still have work to do, these efforts have allowed us to move beyond this period of fixing and begin building our businesses again.

We have a solid foundation of creative excellence and innovation built over the past century, which has only been reinforced by the important restructuring and cost efficiency work we’ve done this year, and we’re on track to achieve roughly $7.5 billion in cost reductions. Combined with our portfolio of valuable businesses, brands and assets – and the way we manage them together – Disney has a strong hand that differentiates us from others in our industry.

DIS shares are higher after hours but not convincingly...

Iger added:

“As we look forward, there are four key building opportunities that will be central to our success: achieving significant and sustained profitability in our streaming business, building ESPN into the preeminent digital sports platform, improving the output and economics of our film studios, and turbocharging growth in our parks and experiences business. We have already made considerable advancements in these four areas and will continue to move forward with a sense of purpose and urgency, and I’m bullish about the opportunities we have before us to create lasting growth and increase shareholder value.”

Disney’s shares have fallen more than 15 per cent over the past year, prompting a renewed challenge from activist investor Nelson Peltz of Trian Partners, who Iger said he spoke to recently but "doesn't have any specific about what Peltz is after."