Disney shares rise on strong earnings beat, dividends and lower streaming losses

Walt Disney Co. shares rose 7% in after-hours trading Wednesday, thanks to stronger-than-expected quarterly earnings, deeper haircuts and a massive narrowing of losses in the streaming business.

The company’s board of directors approved a $3 billion stock repurchase – the first since 2018 – and declared a cash dividend of 45 cents per share payable on July 25. The dividend program was suspended during COVID. It also led to a 20% increase in EPS for fiscal 2024, to $4.60.

The entertainment giant also announced it will invest $1.5 billion for an equity stake in Epic Games Inc., the publisher of the wildly popular video game “Fortnite.”

which is gearing up for a confrontation between activists and investors at its annual shareholder meeting on April 3, reported fiscal first-quarter net income of $1.91 billion, or $1.04 per share. After accounting for restructuring costs and other effects, Disney reported earnings of $1.22 cents per share.

Revenue remained stable at $23.55 billion.

Analysts polled by FactSet expected, on average, 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 Co. to a period of sustained growth and shareholder value creation,” Chief Executive Bob Iger said in a statement announcing the results. “Our strong performance in the last quarter demonstrates that we have turned the corner and entered a new era for our company, focused on strengthening ESPN for the future, transforming streaming into a profitable growth business, reinvigorating our film studios and accelerating growth in our parks and experiences. .”

In a wide-ranging interview with CNBC shortly after the results were released, Iger said he was confident the company would find a successor for him when his contract expires at the end of 2026. He added that Disney is on track way to reach or exceed its $7.50. Annualized savings target of billions by the end of fiscal 2024.

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

Experiences brought in $9.13 billion, up 7% from last year’s $8.55 billion. Sports, which includes ESPN, generated $4.84 billion.

Disney+ reached 111.3 million subscribers, substantially reducing the division’s quarterly loss by $138 million, compared to a loss of nearly $1 billion in the same quarter last year. Disney is in a streaming race with Netflix Inc. NFLX,
Apple Inc. AAPL,
Amazon.com Inc. AMZN,
Warner Bros. Discovery Inc. WBD,
Comcast Corp. CMCSA,
and other.

It was also announced that the record-breaking concert film “Taylor Swift: The Eras Tour” will debut on Disney+ on March 15, with four additional songs not available in the theatrical release or DVD.

As the company celebrates its centennial, it faces a maze of problems. As Iger attempts to profit from the streaming business, he faces a showdown with activist investors.

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

To know more: Disney activist Blackwells proposes splitting the company in a proxy fight

Iger said he had not spoken to the activists and dismissed their actions as a “distraction.”

ESPN, Fox Corp. FOX,
and Warner Bros. Discovery Inc. WBD,
said Tuesday that 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 an important milestone taking ESPN in the direction of its direct-to-consumer business, Iger told CNBC, and Disney continues to seek commercial partners for the service.

To know more: Disney, Fox and Warner Bros. are teaming up to launch a new sports streaming service

ESPN will be available as a standalone streaming service in 2025, according to Iger.

Disney shares are down 11% over the past year. The S&P 500 SPX index rose 21%.

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