LDN - Business

Disney Q4 bolstered by strong results from streaming, 'Inside Out 2' and 'Deadpool & Wolverine'

[November 15, 2024] By MICHELLE CHAPMAN

Disney's fourth-quarter adjusted profit beat Wall Street's expectations, bolstered by strong results from its streaming service and box office success with “Inside Out 2” and “Deadpool & Wolverine.”

Disney earned $460 million, or 25 cents per share, for the period ended Sept. 28. A year earlier the Burbank, California-based company earned $264 million, or 14 cents per share.

Removing certain items, earnings were $1.14 per share. This topped the $1.09 per share that analysts surveyed by Zacks Investment Research were looking for.

Shares jumped more than 9% before the market open on Thursday.

Revenue climbed 6% to $22.57 billion, but fell a bit short of Wall Street's estimate of $22.59 billion.

Operating income for the entertainment segment, which includes its movie studio and parts of its television wing, more than quadrupled to $1.07 billion.

This was helped in part by a strong performance from its content/sales, licensing and other segment, which benefited from $316 million in operating income from “Inside Out 2” and “Deadpool & Wolverine.”

The Walt Disney Co. said Thursday that its direct-to-consumer business, which includes Disney+ and Hulu, reported quarterly operating income of $253 million compared with an operating loss of $420 million a year earlier. Revenue rose 15% to $5.78 billion.

The combined streaming businesses, which includes Disney+, Hulu and ESPN+, achieved profitability for the first time in the third quarter.

Disney+ saw a 2% increase in paid subscribers domestically, which includes the U.S. and Canada. It had a 5% rise internationally, which excludes Disney+ HotStar.

Disney ended the quarter with 174 million Disney+ Core and Hulu subscriptions, and more than 120 million Disney+ Core paid subscribers, an increase of 4.4 million over the prior quarter.

Disney said that its improved direct-to-consumer business results were due in part to subscription revenue growth thanks to increased in retail pricing and subscriber growth. Advertising revenue also increased and marketing costs at Disney+ declined.

"This was a pivotal and successful year for The Walt Disney Company, and thanks to the significant progress we’ve made, we have emerged from a period of considerable challenges and disruption well positioned for growth and optimistic about our future,” CEO Bob Iger said in a statement.

Iger was confident about the future of Disney's streaming platform on the company's conference call, noting that whenever Disney has success with a movie, or there's expected success for a movie, like with “Inside Out 2” and “Deadpool & Wolverine,” the viewership for previous films, like “Inside Out” and “Deadpool,” spikes significantly on its streaming service. Iger anticipates this trend will continue in the future.

Mike Proulx, Forrester vice president, research director, is also upbeat on Disney's streaming business.

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Disney Cruise Line's newest ship, The Treasure, arrives at dawn Port Canaveral, Fla., Tuesday, Nov. 12, 2024. (Joe Burbank/Orlando Sentinel via AP)

“Disney’s very strong quarter, once again, proves that content is what matters most," he said in an emailed statement. “With better-than-expected subscriber growth and improved profitability, Disney’s streaming business seems to have turned the emerging media corner to cement itself as a maturing growth driver for the future of Disney’s business.”

The Experiences division, which includes six global theme parks, its cruise line, merchandise and videogame licensing, reported operating income dropped 6% to $1.7 billion. While operating income improved at domestic parks and Experiences, it fell for international parks and Experiences.

Disney previously forecast that its fourth-quarter Experiences operating income would fall by mid single digits compared with the prior-year period due to domestic parks moderation as well as cyclical softening in China and less people at Disneyland Paris due to the impact the Olympics had on normal consumer travel.

Looking ahead, Disney anticipates high-single digit adjusted earnings per share growth for fiscal 2025. The company predicts double digit earnings per share growth for fiscal 2026 and 2027.

Last month Disney said that it was tapping Morgan Stanley executive James Gorman to serve as its next chairman, beginning early next year. The entertainment giant also announced that it anticipates naming its new CEO in early 2026.

Gorman will become chairman on Jan. 2, 2025. He will succeed Mark Parker, who is leaving after serving on Disney’s board for nine years.

Disney is searching for a new CEO to succeed Bob Iger. Iger came back to Disney in 2022 after a period of clashes, missteps and a weakening financial performance at the company under his chosen successor, Bob Chapek.

Gorman said in a statement in October that by naming Disney’s next CEO in 2026, it “will allow ample time for a successful transition before the conclusion of Bob Iger’s contract in December 2026.”

Disney is continuing to review internal and external candidates for the CEO position.

In April shareholders rebuffed efforts by activist investor Nelson Peltz to claim seats on the company board, standing firmly behind Iger as he tries to energize the company after a rough stretch.

In June Disney asked a federal appellate court to dismiss its lawsuit against Florida Gov. Ron DeSantis after his appointees approved a deal with the company on how Walt Disney World will be developed over the next two decades, ending the last piece of conflict between the two sides.

As part of the 15-year deal, Disney agreed to invest $17 billion into Disney World over the next two decades and the district committed to making infrastructure improvement on the theme park resort’s property.

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