Disney posts surprise profit in streaming, raises earnings forecast
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[May 07, 2024] By
Lisa Richwine
LOS ANGELES (Reuters) - Walt Disney's streaming entertainment unit
posted its first profit on Tuesday, two quarters ahead of schedule, and
the media company raised its annual earnings per share outlook as it
said turnaround efforts were yielding results.
Shares of the company were down 1.4% in premarket trading.
Disney now expects adjusted earnings per share to rise by 25% this
fiscal year, the company said, up from the 20% it previously forecast.
It attributed the change to strong results at theme parks and
improvements in the streaming business.
The direct-to-consumer entertainment division - which includes the
Disney+ and Hulu streaming services - reported operating income of $47
million from January through March.
Disney had promised Wall Street that the streaming operation would
become profitable by September. The division had been losing money since
Disney+ debuted in 2019 in the company's major push to compete with
Netflix.
"Our strong performance this past quarter demonstrates we have turned
the corner and entered a new era for our company," Chief Executive Bob
Iger, who defeated board challenges from activist investors last month,
said in a statement.
"The steps we are taking today lend themselves to solidifying Disney's
place as the preeminent creator of global content," Iger added.
Like other media companies, Disney has been trying to adapt to consumer
migration from cable television to streaming entertainment.
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Iger, who came out of retirement to revamp Disney in November 2022,
instituted cost cuts that are expected to reach at least $7.5 billion by
the end of September. He also unveiled a 10-year, $60 billion investment
in theme parks and announced plans for a stand-alone ESPN streaming app,
among other efforts.
The earlier-than-expected profit from streaming entertainment was driven
by aggressive cost management, Chief Financial Officer Hugh Johnston
said in an interview. A year ago, the streaming unit lost $587 million.
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A screen shows the logo and a ticker symbol for The Walt Disney
Company on the floor of the New York Stock Exchange (NYSE) in New
York, U.S., December 14, 2017. REUTERS/Brendan McDermid/File Photo
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Disney+ added more than 6 million customers during the quarter, and
average revenue per user rose 44 cents, outside of India. Disney
offers a lower-priced plan in India that it counts separately.
Because of costs to stream cricket, streaming entertainment will
likely report a loss for the current quarter but swing back to a
profit the following period, Johnston said.
Disney also reports results for a combined streaming unit, including
ESPN+. The combined unit should generate a fiscal fourth-quarter
profit and become a "meaningful future growth driver for the
company, with further improvements in profitability for fiscal
2025," Disney said in its earnings statement.
For January through March, the combined streaming business with
ESPN+ lost $18 million.
During that time, the Mouse House posted diluted earnings per share,
excluding certain items, of $1.21, ahead of analysts' consensus
estimate of $1.10, according to LSEG data. Quarterly revenue rose to
$22.1 billion, in line with analyst forecasts.
The company's experiences division, which includes the Disney theme
parks around the world, reported operating income of $2.3 billion, a
12% increase from a year earlier.
At Disney's entertainment segment, the home of the traditional TV
business, streaming and film, operating income rose 72% from a year
earlier to $781 million.
The sports unit that includes ESPN saw operating income decline by
2% to $778 million, which it attributed to the timing of college
football playoff games.
(Reporting by Lisa Richwine in Los Angeles; Additional reporting by
Aditya Soni in Bengaluru and Dawn Chmielewski in Los Angeles;
Editing by Peter Henderson, Matthew Lewis and Christopher Cushing)
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