Disney Aces Wall Street’s Test
This morning has proven unlike any in recent memory.
For the first time in ages, a Disney fiscal earnings report included real intrigue.
With the economy struggling and The Walt Disney Company potentially more impacted by tariffs than most, there was cause for concern.
Realistically, Wall Street already punished Disney by dropping the stock more than $20 in March and April. But investors are rarely reasonable people.
Image Credit: Disney
So, Disney just tried to pass Wall Street’s latest test. Did the company succeed? Read on to find out…
A Company in Danger
Photo: Deadline
I’m often fascinated by how quickly Disney’s fortunes can change.
For example, the company entered 2020 with the momentum of a runaway freight train.
Photo: Disney
By the end of January 2020, then-CEO Bob Iger had one foot out the door when he learned that COVID-19 would close Disney’s Chinese theme parks.
A couple of years later, Iger’s replacement, Bob Chapek, had seemingly secured his future at Disney when he signed a multi-year contract extension.
Image rights: CNBC and Illustration by Elham Ataeiazar
Fun fact: If Chapek were still at Disney, he would still be working under that contract, which would have expired later in 2025.
In November 2022, Chapek’s contract ended earlier than expected when Disney fired him.
Photo: PRNewsFoto/The Walt Disney Co.
Then, for the next 18 months, Iger returned as CEO and struggled to clean up Chapek’s mess.
During the second half of 2024, the tide definitively turned, with Disney entering 2025 in the best shape it had been in since 2019.
Apparently, something really bad must happen to Disney every five years, and this time, it’s an international tariff war.
Unfortunately for Disney, the two countries primarily engaged in the squabble are the United States and China.
Photo: DIsney
Those two countries claim two-thirds of Disney’s theme park empire, and that’s before we factor in another aspect of Disney’s business model.
Losing cheap manufacturing in China hurts, as does the potential loss of Chinese box office revenue for Disney blockbusters.
Shanghai Disney
And that’s before we factor in the batch of nonsense about potential movie tariffs for titles not filmed in the United States.
Disney executives must be seeing shadows or maybe even feeling like they fumbled at the goal line.
Everything was going great at the start of the year. Now, Disney is spending this earnings report playing defense. Here’s what we learned.
Disney by the Numbers
Photo: Disney
As I referenced, Wall Street ostensibly already adjusted its expectations for Disney’s 2025 revenue by downgrading the stock.
When I say downgrading, I mean the people purchasing the stock. Virtually all major investment firms currently grade Disney as some degree of a Buy.
Photo: Disney
So, this morning’s fiscal earnings should theoretically only have upside for Disney. In a perfect world, good numbers would guarantee a price increase.
Alas, we don’t live in that world, as Wall Street never makes a lick of sense.
Photo: Disney
An excellent example of this is Tesla, which recently announced a 70 percent (!!!) drop in revenue year-over-year. The stock went up, not down.
The “make it make sense!” meme was born for stuff like this. And Disney is in real danger here because a lot of wealthy people want the stock to drop.
Photo: Deadline
If it does, they can load up on it at a lower value and then ride the wave as it naturally ascends again, which will happen.
The company’s core revenue generators remain fundamentally strong. But that’s sadly not how any of this works.
Photo: Los Angeles Times
If Disney misses on its earnings today, the stock is highly likely to drop, a story MickeyBlog will cover throughout the next 24 hours.
Wall Street expected Disney to earn $23.05 billion this quarter, which would be an increase of nearly $1 billion from last year’s $22.08 billion.
Similarly, forecasts projected earnings per share (EPS) of $1.20, which would be right in line with $1.21 during the fiscal second quarter of 2024.
Well, Disney actually reported revenue of $23.6 billion, which is a gigantic hit against projections.
Photo: USA Today
On the EPS front, Disney managed $1.45, which is a sizable hit by 25 cents.
Other Disney Stories of Note
(Photo Illustration by Mateusz Slodkowski/SOPA Images/LightRocket via Getty Images)
Disney has largely corrected its previous blemish, the Direct-to-Consumer (DtC) division, posting positive results in recent quarters.
Still, Wall Street worried about this segment as Disney had previously indicated that Disney+ subscriber numbers would drop for the quarter.
Photo Credit: DisneyPlus.com
In a modest surprise, Disney reported 1.4 million more subscribers for the quarter, bringing its global base to 126 million. Wall Street expectations had suggested $123.35 million.
The division earned $6.12 billion in revenue with a net profit of $336 million.
The Walt Disney Company
With the streaming division becoming a steady performer, critics recently moved the goalposts to the theme parks segment.
Disney Experiences is responsible for two-thirds of all the company’s operating income. It’s the figurative breadwinner for Disney.
Photo: Washington Post
So, the fears of a shaky economy and the perceived threat of Universal Epic Universe have caused concern.
Anyone with even a basic understanding of fiscal earnings would understand that none of this would impact Disney’s most recent quarter, but here we are.
Photo:knowyourmeme.com
This topic could set Disney’s stock price if the numbers don’t match Wall Street’s arbitrary expectations.
For the quarter, Disney Experiences earned $8.889 billion, a 6 percent increase from 2024.
For what it’s worth, Wall Street had projected theme park division revenue of $8.76 billion after Disney earned $8.39 billion for the same quarter last year.
Make of that what you will. I can assure you that no matter what either of us thinks, the conversation will get blown out of proportion on CNBC and r/WallStreetBets.
Disney’s Entertainment division managed $10.682 billion, well ahead of the estimate of $10.48 billion.
Both numbers are substantially better than 2024’s $9.796 billion.
Finally, Disney’s Sports core was projected to have flat revenue growth of $4.32 billion compared to 2024’s $4.31 billion.
This segment, which heavily relies on ESPN revenue, earned $4.534 billion.
Final Thoughts
Disney will provide additional color during its earnings call. The net income increased $3.28 billion, which is $1.81 per share.
That’s substantially better than the fiscal second quarter of 2024, when Disney’s earnings per share was actually a loss of one penny.
Overally, Disney’s revenue is up 7 percent year-over-year, and all of the stable metrics are decidedly positive on first blush.
So, Disney appears to have aced its test.
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