Disney Shines In All Its Entertainment Glory – Walt Disney (NYSE:DIS)

On Thursday, the Walt Disney Company DIS reported its fiscal fourth quarter results that topped estimates as its entertainment segment shined in its full splendor, mirrored in box office success as well as streaming business’ growth and profitability. 

Bob Iger is getting Disney back in shape.

For the September quarter, Disney reported revenue grew 6% to $22.57 billion, topping LSEG’s consensus estimate of $22.45 billion.  Net income grew to $460 million, or 25 cents per share, from $264 million, with adjusted earnings per share amounting to $1.14, also surpassing LSEG’s estimate of $1.10.  Operating income grew 23% to $3.66 billion.

Fueled by box office success, the entertainment segment that is home to traditional TV networks, direct-to-consumer streaming and films grew 14% YoY to $10.83 billion. Inside Out 2 surpassed the success of Frozen II, becoming the highest-grossing animated movie of all time. Then, there was yet another success on the box office front with “Deadpool & Wolverine” surpassing “Joker” from Warner Bros. Discovery WBD and taking the title of highest-grossing R-rated film of all time. Together, these two films added $316 million of profit during the quarter with the entertainment segment reporting and overall profit of $1.1 billion in profit. Executives also revealed that Disney became the first film studio to cross $4 billion globally this year. 

Five years since Disney+ launched, it is now profitable. combined streaming business, which includes Disney+, Hulu and ESPN+, reported operating income of $321 million, which is an entirely different story compared to last year’s comparable quarter when it reported a loss of $387 million. Like its streaming peers, Warner Bros. Discovery, as well as Netflix NFLX, Comcast Corporation CMCSA and Paramount Global PARA, Disney+ Core subscribers grew 4%, to 122.7 million, with Hulu subscribers alone growing 2% to 52 million. However, average revenue per user for domestic Disney+ customers dropped as more than half of U.S. Disney+ subscribers are choosing the cheaper, ad-supported tier, which on the other hand, bodes well for Disney’s advertising growth prospects. Overall, streaming entertainment ad revenue was up 14%/ while sports segment, made up primarily of ESPN, reported flat revenue. 

Experiences segment that includes theme parks and consumer products, saw revenue grow 1% to $8.24 billion due to a slowdown, particularly in the U.S. following the post-pandemic surge in visitors and the lull is expected to continue throughout the following quarters. Comcast also reported lower attendance at its Universal theme parks. Due to fewer visitors, Comcast reported NBCUniversal’s theme parks revenue dropped by 5.3% to about $2.3 billion. On the other hand, Comcast was fueled by the Summer Olympics that boosted its NBCUniversal revenue, as well as Peacock’s subscriber count. Peacock that had the exclusive streaming rights gained 3 million subscribers, paid subscribers grew 29% YoY to 36 million and with revenue growing 82% to $1.5 billion, Comcast narrowed Peacock’s losses.

Disney’s fiscal 2025 guidance

Compared to the just finished fiscal year, Disney guided for high-single-digit adjusted earnings growth.However, due to higher pricing and the end of a promotional offer, Disney is expecting a “modest decline” in Disney+ Core subscribers during the fiscal first quarter. However, the bigger picture for the fiscal 2025 is bright with profit in the entertainment streaming business, which excludes ESPN+, is expected to see a YoY increase of roughly $875 million with fiscal 2026 being even brighter with a double-digit percentage rise. Despite the $130 million hit of hurricanes and Cruise Line prelaunch costs of $90 million that will weaken first fiscal quarter results, the experience segment is expected to see its profit grow 6% to 8% in the new fiscal year. 

With the upcoming releases of “Moana 2” and “Mufasa: The Lion King,” Disney is kicking off the holiday season on a strong note. More importantly, with the streaming segment now being profitable, Disney reaffirmed an important pathway for long-term growth.

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