The Walt Disney Company (NYSE: DIS) reported better-than-anticipated fiscal 2024 first-quarter earnings. The top line, however, was missed by a small margin. The media and entertainment company also issued solid FY24 earnings guidance, highlighting cost reduction initiatives and the solid performance of its theme parks. The company also revealed its intention to acquire a billion-dollar stake in Epic Games (Fortnite Studio). The stock of Walt Disney ended Thursday’s trading session at $110.54, up $11.40, or 11.50%, from the prior close.
The Burbank, California-based company reported first-quarter revenues of $23.55 billion, up 0.20% from $23.51 billion in the similar quarter of fiscal 2023.
For the first quarter, which ended December 30, 2023, Walt Disney posted net income of $1.91 billion, or $1.04 per share, compared with $1.28 billion, or $0.70 per share, in the first quarter that ended December 31, 2022.
Excluding amortization of TFCF and Hulu intangible assets, fair value step-up on film and television costs, and restructuring and impairment charges, among others, the company recorded 1Q 2024 non-GAAP income of $2.496 billion, or $1.22 per share, an increase from $1.89 billion, or $0.99 per share, in 1Q 2023.
Analysts surveyed by LSEG had anticipated Netflix to report earnings of $0.99 per share on revenues of $23.64 billion.
Robert Iger, CEO, of The Walt Disney Company, stated “Our strong performance this past quarter demonstrates we have turned the corner and entered a new era for our company.”
Segment wise:
- Entertainment revenues fell by 7% y-o-y to $9.981 billion. The decline was led by linear networks. Additionally, content sales and licensing fees continued to decline. However, the direct-to-consumer division revenues recorded a 15% increase to $5.55 billion.
- Sports (ESPN) revenues grew by 4% y-o-y to $4.84 billion.
- Experiences revenues were $9.13 billion, an increase of 7% from last year. The decrease was primarily led by lower visitors to its Florida theme parks.
Disney stated that it is on course to reach or surpass its objective of slashing expenses by a minimum of $7.50 billion by the end of FY24.
During 1Q 2024, Walt Disney’s streaming video division, Disney+ Hotstar, recorded a 2% q-o-q rise in paid subscribers to 38.30 million. Interestingly, the majority of the 38.30 million subscribers were from India. Notably, this is the first increase since the platform recorded a reversal of fortune following the loss of digital streaming rights for the Indian Premier League (IPL) in 2023. Disney+ Hotstar had recorded a consistent decrease in its subscriber numbers in the past year, specifically after it hit a high of 61.30 million in September 2022.
Furthermore, during Q1 2024, the ARPU (average monthly revenue per user) for Disney+ Hotstar rose to $1.28 from $0.70. The increase was led by a rise in advertising revenue and growth in retail pricing, specifically negated by a large number of subscribers from low-priced regions.
However, the cumulative Disney+ subscriber count declined by 1% to 46.1 million.
To spur growth, the company is acquiring a $1.50 billion stake in Epic Games (owned by Fortnite studio). Additionally, Walt Disney is also planning to roll out its ESPN streaming platform by the fall of 2025. The partnership intends to bring together Disney’s huge spectrum of brands and associates.
Looking ahead, Walt Disney forecasts FY24 non-GAAP earnings of $4.60 per share, implying a growth of 20% from FY23. The company also projects FY 2024 free cash flow of about $8 billion.
The company’s board has approved a cash dividend of $0.45 per share, payable on July 25, 2024. The approved dividend reflects a 50% rise from the previous dividend paid in January. Walt Disney also announced a $3 billion share repurchase program.
The quarterly earnings beat and solid FY 2024 earnings outlook are expected to keep the stock of Walt Disney slightly bullish in the near term.
The historical price chart indicates that Disney’s stock has formed a bullish gap pattern. The major support exists at $96 levels. The stochastic indicator is in the bullish region. Therefore, we anticipate the stock to consolidate and rise further in the days ahead.
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