Disney’s stock pops on big earnings beat, dividend, lower streaming losses

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Walt Disney Co.’s stock popped 7% higher late Wednesday on stronger-than-expected quarterly earnings, deeper cuts, and a massive reduction in its streaming business losses.

The company’s embattled board of directors approved a share repurchase of $3 billion — its first since 2018 — and declared a cash dividend of 45 cents a share payable July 25. [The program had been suspended during Covid.] It also guided to a 20% increase in EPS for fiscal year 2024, to $4.60.

The entertainment giant also announced it is investing $1.5 billion for an equity stake in Epic Games Inc., the publisher of the massively popular videogame “Fortnite.”

which is girding for an activist-investor confrontation at its annual shareholders meeting on April 3, reported fiscal first-quarter net income of $1.91 billion, or $1.04 a share. After adjusting for restructuring costs and other effects, Disney reported earnings of $1.22 cents a share.

Revenue was flat at $23.55 billion.

Analysts surveyed by FactSet had, on average, expected adjusted earnings of 99 cents a share on revenue of $23.7 billion.

“Just one year ago, we outlined an ambitious plan to return The Walt Disney Company to a period of sustained growth and shareholder value creation,” Disney Chief Executive Bob Iger said in a statement announcing the results. “Our strong performance this past quarter demonstrates we have turned the corner and entered a new era for our company, focused on fortifying ESPN for the future, building streaming into a profitable growth business, reinvigorating our film studios, and turbocharging growth in our parks and experiences.”

In a wide-ranging interview with CNBC shortly after the results were disclosed, Iger said he is confident the company will find a successor for him when his contract expires at the end of 2026. He added Disney is on track to meet or exceed its $7.5 billion annualized savings target by the end of fiscal 2024.

Disney’s largest business segment, entertainment, generated $9.9 billion in revenue, down 7% from the same quarter a year ago.

Experiences hauled in $9.13 billion, an increase of 7% from $8.55 billion last year. Sports, which includes ESPN, generated $4.84 billion.

Disney+ reached 111.3 million subscribers, leading to a substantially lower quarterly loss of $138 million, compared with a loss of nearly $1 billion in the same quarter last year. Disney is locked in a streaming race with Netflix Inc.
Apple Inc. 
Amazon.com Inc.  
  Warner Bros. Discovery Inc. 
Comcast Corp. 
and others.

As the company celebrates its 100th anniversary, it faces a labyrinth of problems. While Iger attempts to turn a profit with the streaming business, he faces a showdown with activist investors.

In the latest twist Tuesday, investment firm Blackwells Capital implored shareholders to elect its three nominees to the board of directors and split Disney into three parts: sports, entertainment and resorts. Another activist investor, Trian Partners, has proposed two members to Disney’s board.

Read more: Disney activist Blackwells proposes splitting up company in proxy fight

Iger said he has not talked to the activists, and dismissed their actions as a “distraction.”

ESPN, Fox Corp.
and Warner Bros. Discovery Inc.
said Tuesday they will create a joint sports streaming service, available as early as the fall, that will offer a sort of Hulu model for sports programming.

The joint venture marks a major milestone taking ESPN in the direction of the direct-to-consumer business, Iger told CNBC, and Disney continues to look for business partners for the service.

Read more: Disney, Fox and Warner Bros. team up to launch new sports streaming service

Shares of Disney have dropped 11% over the last year. The S&P 500 
has climbed 21%.

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