Disney beats on earnings, boosts dividend as streaming losses narrow

Disney (DIS) said Wednesday it would increase its cash dividend by 50% as the company reported first-quarter earnings that beat expectations while streaming losses narrowed.

Disney reported adjusted earnings of $1.22 per share – a significant beat from the $0.99 expected by analysts polled by Bloomberg. The company also forecast full-year 2024 earnings of $4.60 per share, an increase of at least 20% from 2023.

Revenue came in at $23.5 billion, a slight deviation from the $23.8 billion expected.

The company announced a cash dividend of $0.45 per share, an increase of 50% from the last dividend paid in January. The dividend will be payable on July 25 to shareholders of record at the close of business on July 8.

The board also approved a new stock repurchase program, targeting $3 billion in purchases in fiscal 2024.

Disney is grappling with challenges including the decline of its linear TV business, slower growth in its parks business and losses in streaming. Last year, activist investor Nelson Peltz renewed his efforts to shake up the board as the stock price hit its lowest level in several years.

CEO Bob Iger has committed to various cost reductions to address these challenges. The company said Wednesday it was on track to meet or exceed its annualized savings target of $7.5 billion by the end of fiscal 2024, adding that it would “continue to seek new opportunities for efficiency.

Shares jumped about 7% in after-hours trading following the results.

New announcements: games, content, sports

Disney had a lot to say on Wednesday with a slew of new announcements.

Notably, the company announced plans to invest $1.5 billion in Fortnite maker Epic Games, with Iger calling it Disney's “biggest entry into the world of video games.”

“Our new relationship with Epic Games will create a transformational gaming and entertainment universe that integrates Disney's world-class storytelling into Epic's cultural phenomenon, Fortnite, enabling consumers to play, watch, create and purchase digital goods and physical,” Iger said. during the results call.

On the content side, the company said Disney+ will be the exclusive streaming site for “Taylor Swift: The Eras Tour (Taylor's Version).” The concert film will feature five additional acoustic songs, including “Cardigan.”

Meanwhile, an animated sequel to “Moana” will hit theaters in November as Disney leans more into sequels and franchises amid a struggling box office.

Disney also announced a firmer timeline for the company's ESPN over-the-top (OTT) streaming service, revealing that the platform will launch in fall 2025.

ESPN noted in a social media post the service will launch before the start of the football season next year.

The development comes after the news broke. Disney's ESPN will team up with Warner Bros. Discovery (WBD) and Fox (FOXA) to launch a new sports streaming service, expected to debut this fall.

Focus on the profitability of streaming

Streaming losses within the entertainment division narrowed to $138 million from a loss of $984 million in the year-ago period after the company raised streaming prices; However, Disney+'s core subscribers, which exclude its Indian product Disney+ HotStar, fell sequentially by 1.3 million due to these increases.

The subscriber loss, in line with the company's forecast, was slightly higher than Wall Street expected, with consensus estimates projecting a loss of about 700,000 core Disney+ users.

The company said it expects to add 5.5 million to 6 million Disney+ core users in the second quarter. It also expects continued positive momentum in average revenue per user, or ARPU, after Disney+'s core ARPU increased sequentially by $0.14 from the fourth quarter.

Including ESPN+, total direct-to-consumer losses were $216 million, compared to $1.05 billion reported the year before.

“We continue to expect to achieve profitability from our combined streaming businesses in the fourth quarter of fiscal 2024,” the company said. “We believe this business will ultimately be a key earnings growth driver for the company.”

Amid recent price hikes, the company will also begin implementing crackdowns against password sharing. Disney said it likely wouldn't see “notable benefits” from these initiatives until the second half of this year.

Just before the results, Disney sent notices to Disney+ users, warning them that it would begin limiting account sharing starting in March. The announcement came just days after Hulu sent a similar notice to subscribers.

Iger, who previously said the number of subscribers sharing accounts was “significant,” revealed for the first time that the company would address password sharing during its fiscal third-quarter earnings conference call in August .

A screen displays the logo and a stock symbol of The Walt Disney Company on the floor of the New York Stock Exchange (NYSE) in New York, December 14, 2017. (Brendan McDermid/REUTERS) (Reuters/Reuters)

As a reminder, Disney recently adjusted its reporting structure after CEO Bob Iger reorganized the company into three main business segments: Disney Entertainment, which includes its entire media and streaming portfolio; Experiences, which encompass the parks sector; and Sports, which includes the ESPN and ESPN+ networks.

Here is how these individual segments performed during the quarter compared to Wall Street consensus estimates compiled by Bloomberg:

  • Entertainment revenue: $9.98 billion versus $10.54 billion expected

  • Sports income: $4.84 billion versus $4.62 billion expected

  • Income from experiences: $9.13 billion against $9.03 billion expected

The segment's total operating income was $3.88 billion, an increase of 27% compared to the same period last year.

Entertainment operating profit exceeded 100% year-over-year to $874 million, while the experiences division generated all-time highs in revenue, operating profit and margin operating results in the first quarter.

The sports segment generated an operating loss of $103 million, but still saw a 37% improvement from the $164 million loss reported a year ago.

Linear networks, for their part, continued to experience difficulties. The segment fell 12% year-over-year to $2.8 billion, while shelf operating profit was $1.2 billion, a 7% decline.

Alexandra Canal is a senior reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at [email protected].

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