Disney Sees Solid Quarter With Upbeat Streaming Outlook; “We Have Turned The Corner And Entered A New Era For Our Company,” Says CEO Bob Iger

Disney’s profit blew away forecasts although revenue fell a bit short in a key, and solid, earnings report that the company hopes will set the stage for more robust growth.

Revenue was flat at $23.5 billion for Disney’s fiscal first quarter ended in December.

Diluted EPS (excluding some items) was $1.22, up 23% from the year before.

Entertainment DTC operating losses improved by nearly $300 million versus the prior quarter as it heads toward profitability by the end of fiscal 2024.

“Just one year ago, we outlined an ambitious plan to return The Walt Disney Company to a period of sustained growth and shareholder value creation,” said CEO Bob Iger. “Our strong performance this past quarter demonstrates we have turned the corner and entered a new era for our company, focused on fortifying ESPN for the future, building streaming into a profitable growth business, reinvigorating our film studios, and turbocharging growth in our parks and experiences.

“As we build for the future, the steps we are taking today lend themselves to solidifying Disney’s place as the preeminent creator of global content. Looking at the renewed strength of all of our businesses this quarter – from Sports, to Entertainment, to Experiences – we believe the stage is now set for significant growth and success, including ample opportunity to increase shareholder returns as our earnings and free cash flow continue to grow,” said the chief executive.

Disney is also facing a proxy fight two activist investors who want the company to do more to create shareholder value with the stock well off his highs. The company announced a dividend payout and a new stock repurchase plan, both attractive to shareholders.

Hulu subscribers increased by 1.2 million from the prior quarter. Disney+ core subscribers decreased sequentially by 1.3 million, in line with prior guidance and reflecting a substantial price increase in the quarter as well as the end of the global summer promotion.

Disney+ Core ARPU increased sequentially by 14 cents versus the fourth quarter.

We expect Disney+ Core subscriber net additions of between 5.5 and 6 million and ongoing positive momentum in ARPU in the second quarter.

A focus on costs led to $500 million less in selling, general and administrative and other operating expense saving in the quarter. Disney in on track to meet or exceed a $7.5 billion annualized savings target by the end of fiscal 2024.

Disney said it expects full year fiscal 2024 earnings per share excluding certain items to increase by at least 20% year on year with free cash flow of $8 billion.

By sector, entertainment, which includes linear networks, direct to consumer and content sales/licensing saw revenue fall 12% to $2.8 billion.

Linear network profits dipped 5% on revenue down 14% on lower advertising sales  at the ABC Network attributable to fewer impressions and lower political advertising revenue at the owned TV stations. It blamed the lower network impressions to the impact of the guild strikes on the programming schedule primarily due to a shift of units to the sports segment reflecting the simulcast of certain NFL games.

Disney noted a decline in affiliate revenue due to fewer subscribers at its entertainment cable networks, including the impact of the non-carriage of certain networks by an affiliate.

ESPN is now the biggest part of a new Sports segment Disney breaks out. It saw flat revenue year-over-year of $4.4 billion. It swung to an operating profit of $199 millio from a loss of $38 million.

Parks & Experiences revenue, the company’s economic driver pretty much since Covid ended, saw revenue rise 7% to $9.1 billion. Income of $3.1 billion was up 8% but not domestically – that number was down 2%. Of the U.S. park, Disneyland was flat, Walt Disney World down.

The studio is part of Content Sales/Licensing and Other – the segment with the toughest quarter. Revenue plunged 38% to $1.6 billion and operating losses widened from $1 millio to $224 million. Very tough comps with The Marvels and Wish is the latest quarter, to Black Panther: Wakanda Forever, Avatar: The Way Of Water and Strange World in the year earlier period.

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