Disney Exceeds Earnings Expectations, Raises Dividend as Streaming Losses Decline

Disney Stock

Disney (NYSE:DIS) announced a 50% increase in its cash dividend on Wednesday alongside fiscal first-quarter earnings that surpassed expectations, coupled with a narrowing of streaming losses.

The entertainment giant reported adjusted earnings of $1.22 per share, outstripping the $0.99 forecasted by analysts surveyed by Bloomberg. Additionally, Disney provided guidance for full-year fiscal 2024 earnings at $4.60 per share, marking a minimum 20% rise from 2023.

While revenue slightly missed expectations at $23.5 billion compared to the anticipated $23.8 billion, Disney declared a cash dividend of $0.45 per share, a 50% rise from the previous payout in January. Shareholders of record by July 8 will receive the dividend on July 25.

The board also greenlit a new share repurchase program aiming for $3 billion in purchases in fiscal 2024.

Disney has grappled with challenges such as a declining linear TV business, slower park growth, and streaming losses. Activist investor Nelson Peltz renewed efforts to shake up the board as the stock hit multiyear lows last year.

CEO Bob Iger committed to various cost-cutting measures to tackle these challenges. Disney stated it’s on track to meet or surpass its $7.5 billion annualized savings target by fiscal 2024’s end, continuing to seek efficiency opportunities.

Following the results, shares surged by nearly 10% in early Thursday trading.

Disney made several significant announcements. It disclosed plans to invest $1.5 billion in Epic Games, maker of Fortnite, termed Disney’s “biggest entry ever into the world of video games” by Iger.

Disney+ will exclusively stream “Taylor Swift: The Eras Tour (Taylor’s Version),” featuring additional acoustic songs like “Cardigan.” Also, a sequel to “Moana” is set to release in November as Disney emphasizes sequels and franchises amid a struggling box office.

The company announced a firmer launch timeline for its ESPN streaming service, scheduled for fall 2025. This development follows news of a collaboration between Disney’s ESPN, Warner Bros. Discovery (WBD), and Fox (FOXA) to launch a sports streaming service this fall.

Streaming losses in the entertainment division narrowed to $138 million from $984 million a year ago, driven by raised streaming prices. However, core Disney+ subscribers, excluding Disney+ HotStar in India, declined by 1.3 million due to these increases, slightly surpassing Wall Street estimates.

Disney expects to add 5.5 million to 6 million core Disney+ users in the second quarter as Charter cable subscribers receive complimentary Disney+ subscriptions.

Total direct-to-consumer losses, including ESPN+, amounted to $216 million, down from $1.05 billion in the previous year. Disney anticipates reaching profitability in its combined streaming businesses by the fourth quarter of fiscal 2024.

In response to recent price hikes, Disney plans to curb password sharing, expecting notable benefits in the latter half of the year. It will begin limiting account sharing starting in March, coinciding with similar actions by Hulu.

CEO Iger previously acknowledged significant subscriber account sharing, announcing plans to address it during the fiscal third quarter earnings call in August.

Disney recently restructured its reporting into three core segments: Disney Entertainment, Experiences, and Sports. Despite linear networks struggling, the Entertainment segment’s operating income doubled year-over-year, while Experiences recorded all-time high revenue, operating income, and margin in the first quarter. The Sports segment narrowed its operating loss by 37% compared to the previous year.

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About the author: Stephanie Bédard-Châteauneuf has over seven years of experience writing financial content for various websites. Over the years, Stephanie has covered various industries, with a primary focus on tech stocks, consumer stocks, market news, and personal finance. She has an MBA in finance.