Why Is Disney (DIS) Down 0.3% Since Last Earnings Report?

It has been about a month since the last earnings report for Walt Disney (DIS). Shares have lost about 0.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Disney due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Disney Q1 Earnings Beat Estimates, Revenues Rise Y/Y

The Walt Disney Company reported first-quarter fiscal 2024 adjusted earnings of $1.22 per share, which beat the Zacks Consensus Estimate by 25.77% and increased 23.2% year over year.

Revenues rose 0.2% year over year to $23.5 billion but missed the consensus mark by 0.58%.

Segment Details

Media and Entertainment Distribution revenues (42.4% of revenues) decreased 6.5% year over year to $9.98 billion.

Revenues from Linear Networks declined 12.5% year over year to $2.8 billion. Direct-to-Consumer revenues increased 15% year over year to $5.54 billion. Content Sales/Licensing and Other revenues plunged 38.4% year over year to $1.63 billion.

Parks, Experiences and Products revenues (38.8% of revenues) increased 6.9% year over year to $9.13 billion. Domestic revenues were $6.29 billion, up 3.7% year over year. International revenues jumped 34.9% year over year to $1.47 billion in the reported quarter.

Meanwhile, revenues from Disney’s Consumer Products dropped 1.5% year over year to $1.35 billion.

Subscriber Details

Disney+, as of Dec 31, 2023, had 111.3 million paid subscribers compared with 112.6 million as of Sep 30, 2023.

Meanwhile, DIS’ Hulu ended the quarter with 49.7 million paid subscribers, up from 48.5 million reported in the previous quarter.

ESPN+ had 25.2 million paid subscribers at the end of the fiscal first quarter compared with 26 million at the end of the previous quarter.

Domestic Disney+ average monthly revenue per paid subscriber increased from $7.50 to $8.15 due to an improvement in retail pricing, partially offset by a higher mix of subscribers to promotional offerings.

International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber decreased from $6.10 to $5.91 due to a higher mix of subscribers to promotional offerings.

Disney+ Hotstar average monthly revenue per paid subscriber increased from 70 cents to $1.28 due to improved advertising revenues and a rise in retail pricing, partially offset by a higher mix of subscribers from lower-priced markets.

Hulu SVOD Only average monthly revenue per paid subscriber grew from $12.11 to $12.29 due to a rise in retail pricing, partially offset by lower per-subscriber advertising revenues and a higher mix of subscribers to promotional offerings.

Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $90.08 to $93.61 due to an improvement in retail pricing.

The average monthly revenues per paid subscriber for ESPN+ grew 14% year over year to $6.09, driven by a rise in retail pricing and higher advertising revenues.

Operating Details

Costs & expenses decreased 4.2% year over year to $20.61 billion in the reported quarter.

Segmental operating income was $3.87 billion, up 27.4% year over year.

Media and Entertainment Distribution’s segmental operating income surged 153.3% year over year to $874 million.

Linear Networks’ operating income decreased 7.1% to $1.23 billion. Domestic operating income declined due to lower advertising revenues attributable to a decrease at the ABC Network and lower political advertising revenues at the owned TV stations. The decrease in international operating income was due to lower affiliate revenues, primarily attributable to fewer subscribers.  

Direct-to-Consumer operating loss was $138 million, narrower than the year-ago quarter’s loss of $984 million. The decrease in operating loss was due to subscription revenue growth, attributable to higher rates because of increases in retail pricing across the company’s streaming services and subscriber growth at Disney+ Core and, to a lesser extent, Hulu.

Content Sales/Licensing and Other operating losses were $224 million compared with an operating loss of $1 million reported in the year-ago quarter. The increase in operating loss was due to the performance of The Marvels and Wish in the current quarter compared with Black Panther: Wakanda Forever, Avatar: The Way of Water and Strange World in the prior-year quarter.

Parks, Experiences and Products’ operating income was $3.1 billion, up 8.5% year over year.

The Domestic segment reported an operating income of $2.07 billion, down 1.7% year over year. Domestic Parks and Experiences witnessed a decrease in operating income due to lower results at domestic parks and resorts, largely offset by higher results at Disney Cruise Line.

The International segment reported an operating income of $328 million compared with $79 million in the year-ago quarter. International parks and experiences witnessed an improvement in operating results due to growth at Shanghai Disney Resort and higher operating income at Hong Kong Disneyland Resort.

Consumer Products’ operating profit increased 4.5% year over year to $700 million due to licensing revenue growth resulting from higher sales of products based on Spider-Man and Mickey and Friends, partially offset by a decrease in sales of products based on Star Wars.

Balance Sheet

As of Dec 31, 2023, cash and cash equivalents were $7.19 billion compared with $14.1 billion as of Sep 30, 2023.

Total borrowings were $47.68 billion as of Dec 31, 2023 compared with $42.1 billion as of Sep 30, 2023.

Free cash flow was $886 million in the reported quarter compared with $3.42 billion in the previous quarter.

The board of directors recently approved a new share repurchase program effective Feb 7, 2024, wherein the company plans to target $3 billion in repurchases in fiscal 2024.

Guidance

The company expects Disney+ Core subscriber net additions between 5.5 million and 6 million and ongoing positive momentum in ARPU in the fiscal second quarter.

The company is on track to meet or exceed $7.5 billion annualized savings target by the end of fiscal 2024.

Disney expects full-year fiscal 2024 earnings per share (EPS), excluding certain items, to increase at least 20% from 2023 to approximately $4.60. DIS continues to expect free cash flow generation in fiscal 2024 to be roughly $8 billion.

The company continues to expect the combined streaming businesses to reach profitability in the fourth quarter of fiscal 2024.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, Disney has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Disney has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Zacks Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.

This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.

Free: See Our Top Stock and 4 Runners Up >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

The Walt Disney Company (DIS) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Tags

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.