Is Disney Still Making Enough Money?
The Walt Disney Company has spent the past three years in various stages of chaos.
Internal strife, political pushback from questionably motivated critics, and the challenges of a pandemic have damaged the company.
Recently, Disney CEO Bob Iger has made headlines for hinting at a Disney fire sale and just angered a lot of people.
Not coincidentally, an old rumor about Disney and Apple has popped up again this week.
For these reasons, plenty is riding on Disney’s latest quarterly earnings report. In terms of significance, I’d rank this one as a ten out of ten.
So, is Disney still making money? Here’s everything we just learned.
The Bottom Line
Wall Street really hasn’t changed in my lifetime. When it evaluates quarter earnings, it prioritizes a few key metrics.
Specifically, the ones that matter the most are quarterly revenue and earnings per share.
Historically, Disney has met or surpassed Wall Street expectations more than half the time over the past five years.
For this quarter, Wall Street had projected that Disney would earn $22.50 billion for the quarter with earnings per share (EPS) of $0.95.
Disney just announced actual revenue of $22.33 billion for the quarter, which is up four percent year-over-year.
During the fiscal third quarter of 2022, Disney earned $21.504 billion. So, Disney has expanded its revenue by about $800 million. Much of that comes from one segment not losing as much, as we’ll discuss.
In comparison to the last quarter, the second quarter of 2023, Disney increased 2.4 percent. It earned $21.815 billion last quarter.
In terms of earnings per share, Disney exceeded expectations with $1.03, which is more than the projected $0.95.
EARNINGS: Walt Disney Q3 EPS $1.03 Adj. vs. $0.95 Est.; Q3 Revs. $22.33B vs. $22.50B Est. • $DIShttps://t.co/7BDpwWI3nH pic.twitter.com/KnmiHs9sak
— CNBC Now (@CNBCnow) August 9, 2023
Disney’s operating income remained the same from the same quarter in 2022. The company is at $3.559 billion, which is nearly identical to last year’s $3.567 billion.
That number reflects improvement from the second quarter of 2023, when Disney’s operating income was $3.285 billion. Basically, Disney remains in the same range and has for some time.
Disney also reported a net loss of $460 million for the quarter after it had reported gains of $1.41 billion last year. That’s somewhat worrisome.
Disney by Division
Disney’s various divisions all provided surprises in their own ways.
Let’s start with the one that has everyone so nervous, which is Linear Networks. This division fell seven percent, with revenue of $6.69 billion.
The sharp decline in a once-formidable division exemplifies why Bob Iger has decided to get rid of these assets. They’re fading in value with each passing quarter.
I can use a different data point to reinforce this statement. For the first nine months of this fiscal year, Disney’s Linear Networks has fallen by $1.4 billion! Its current total is $20.6 billion.
You can understand why Disney would want to sell something that had paced at $22 billion a year ago. Cord-cutting has started to bleed onto Disney’s financial ledger.
Meanwhile, Direct-to-Consumer (DTC) went off on a grand adventure. By now, you may have heard that Disney+ missed its subscriber estimates by A LOT.
Well, that’s the story everyone will run with, but it’s not the one that matters most to Disney. While Hotstar subscribers fell by 24 percent, Disney didn’t care.
I say that because the losses in the DTC division were a quarter-billion lower than Wall Street forecasts. DTC earned $5.525 billion while losing “only” $512 million.
When I say Disney only lost half a billion dollars, you’re probably looking at me like I’ve lost my marbles, but I know something you probably don’t.
During the same fiscal quarter in 2022, DTC lost $1.061 billion. Disney has literally cut its DTC losses in half.
As Iger proudly proclaimed, DTC operations have improved by $1 billion in just nine months.
All the budget cuts are working as Disney finds its best price point for the service. Speaking of which, Iger just announced a price increase for Disney+.
About the Parks
While I was watching CNBC today, one of the analysts speculated that Disney’s impressive Parks, Experiences and Products division was in for a bad quarter.
They based this supposition on Disney’s reported struggles on July 4th and suspicions that the Florida Feud had hurt the company. That…wasn’t the case.
As I discussed in detail here, Iger doubled down on the Parks division in the wake of impressive numbers. That’s because of the sustained excellence of this division.
For the fiscal third quarter, Disney’s Parks division increased a massive 13 percent with revenue of $8.326 billion.
Those numbers reflect a revenue increase of $550 million from last quarter. So, any arguments of slowdowns at the theme parks aren’t supported by the financial data.
Overall, this quarter was a good one for Disney, something I’m frankly a bit surprised to say.
Yes, Disney missed its estimates and Disney+ subscriber numbers. However, it hit on its EPS estimate, while the DTC division showed impending signs of strength.
Disney still forecasts profitability in its DTC division by the end of fiscal 2024, which is just 15 months from now.
Should Disney hold with that forecast, the company itself would be in good shape.
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