Disney Falls as Charges Cause Net Loss Despite Surprise Streaming Profit

Shares of the entertainment and media conglomerate The Walt Disney Company (DIS) fell in premarket trading Tuesday after the release of second-quarter results that were in line with revenue expectations, but missed earnings estimates.

Disney reported $22.08 billion in total revenue, up from last year’s mark of $21.82 billion and in line with estimates compiled by Visible Alpha. However, due to a number of goodwill impairment charges, Disney reported a net loss of $20 million, or 1 cent per share, compared to expectations of $1.96 billion in profit, or $1.09 per share.

After adjusting for the one-time charges, Disney reported an adjusted earnings per share (EPS) of $1.21, above estimates of $1.10 per share.

Surprise Direct-to-Consumer Entertainment Segment Operating Profit

Surprisingly, Disney reported an operating profit of $47 million in its direct-to-consumer entertainment segment, compared to the $119.8 million loss analysts expected the division to post and the $587 million it lost last year. It posted an overall streaming loss of $18 million, as ESPN+ continues to weigh on the segment, but its loss was much smaller than last year’s $659 million.

“Looking at our company as a whole, it’s clear that the turnaround and growth initiatives we set in motion last year have continued to yield positive results,” Disney Chief Executive Officer (CEO) Bob Iger said. “We have a number of highly anticipated theatrical releases arriving over the next few months; our television shows are resonating with audiences and critics alike; ESPN continues to break ratings records as we further its evolution into the preeminent digital sports platform; and we are turbocharging growth in our Experiences business with a number of near- and long-term strategic investments.”

First Quarterly Report Since Resolving Proxy Battle

Tuesday’s earnings report is the first since Disney resolved its latest proxy battle with activist investor Nelson Peltz last month, with shareholders backing Iger and re-electing Disney’s current 12 board members at the company’s annual meeting.

Ahead of Tuesday’s report, analysts were optimistic about the outlook of Disney’s various streaming platforms, including its bundle of all three of Hulu, Disney+, and ESPN+, as Iger has said the streaming segment is working its way toward profitability by the end of 2024.

One way Disney plans to get to profitability is following Netflix’s (NFLX) lead into cracking down on password sharing, which the company is set to start enforcing in June, Iger has said.

Disney shares were down 5% less than two hours before the opening bell Tuesday, but have still gained over a quarter in value so far this year.