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Disney is back. After several quarters of cutting costs and revamping its streaming business, CEO Robert Iger’s turnaround plans is paying off: On Thursday, the entertainment giant reported strong quarterly earnings and a robust outlook for the coming year. Revenue in the fiscal fourth quarter totaled $22.57 billion, topping the $22.45 billion expected by analysts, according to estimates compiled by LSEG. Adjusted earnings per share (EPS) jumped 39% year over year to $1.14, outpacing the $1.10 estimate, LSEG data showed. Shares of Disney popped 10% on the results. Bottom line It was a great quarter. Sales and earnings beat. The company generated strong cash flow. And perhaps most importantly for investors, its direct-to-consumer streaming unit’s profitability was well ahead of the consensus estimate. And the good run should continue, with management forecasting earnings growth acceleration over the next couple of years. The team rarely looks that far out in its reports. Helping to deliver that outcome is all the work the team has done to create additional ways to make money on its content. As Iger noted on the earnings conference call, “a successful Disney movie today drives more value than it ever has in the past,” with an increased number of consumer touch points including streaming, parks and resorts, cruise ships, consumer products, and games. “This multiplier effect means that the system economics of our movie business has never been stronger,” he added. Disney also announced a strong slate of releases set for 2025, including “Captain America: Brave New World,” “Lilo and Stitch,” “The Fantastic Four: First Steps,” “Zootopia 2” and “Avatar: Fire and Ash.” Management also shared that its ESPN DTC offering is expected to launch in the fall of 2024. This is the last major strategic move for Disney 2.0. On the call, the team was clearly excited about this launch, noting it will include the basic ESPN services, which is coverage of live sports and studio shows and commentary, along with fully integrated betting. ”But I think one of the things that is, um, hasn’t been appreciated yet is that when you apply technology to the presentation of sports, almost anything is possible. So imagine an AI driven, personalized sports center as a feature for instance,” Iger said. Given the results and management’s rosy outlook, it’s clear that the worst is behind us. Looking ahead, there are plenty of reasons for optimism: A strong content lineup set for 2025 ESPN DTC streaming coming to market next fall Multiple expansion projects in the works at Disney’s theme parks Several new Disney cruise ships Our verdict: Disney shares have plenty of upside potential, and we reiterate our 1 rating and $130 price target. DIS YTD mountain Disney Year to Date Guidance Management provided its initial outlook for 2025: Earnings growth in the high single digit percentage for the full year versus 2024. That appears to exceed Wall Street’s expectations for growth earnings slightly above 4%. Roughly $15 billion in cash flow from operations vs. $14.8 billion expected, and about $8 billion in capital expenditures vs. $6.54 billion expected. That implies free cash flow of about $7 billion vs. $8.1 billion expected. $3 billion in share repurchases. The first quarter will be negatively impacted by the hurricanes that forced its Florida theme parks to close temporarily. Disney Why we own it: We value Disney for its best-in-class theme-park business, which has immense pricing power. We also believe there’s more upside in the stock as management cuts costs, expands profit margins through its direct-to-consumer (DTC) products and finds new ways to monetize ESPN. Competitors: Comcast , Netflix , Warner Bros Discovery and Paramount Global Last buy: July 29, 2024 Initiation: Sept. 21, 2021 The entertainment segment is expected to see operating income growth in the double digit percentage compared to fiscal 2024, weighted to the first half of the year. Within the segment: DTC operating income is expected to increase by about $875 million versus 2024. That amounts to roughly $1.018 billion, nicely ahead of the $969 million expected by analysts. Disney+ core subscribers are expected to decline slightly versus the fourth-quarter result. Content sales and licensing operating income in the current (first fiscal) quarter is expected to be in line with the fourth-quarter result, which beats the $71 million expected. The sports segment is expected to realize 13% operating income growth versus 2024. On a reported basis, however, it is expected to decrease by about 10% after adjusting for the impact of operations in India. The experiences segment is expected to realize 6% to 8% operating income growth, with most coming in the back half of the year. Much better than expected, considering the Street wasn’t expecting much change at all. Further out, the team expects to realize double-digit percentage adjusted earnings growth in both fiscal 2026 and fiscal 2027. Operating cash flow is expected grow a double digit percentage in 2026 vs. 2025 guidance. In entertainment, the team forecasts double digit percentage growth in operating income, with 10% operating margin in its streaming businesses. Sports should hit operating income growth in the low single digit percentage versus 2025. Experiences is expected to post operating income growth in the high single digit percentage. (Jim Cramer’s Charitable Trust is long DIS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Disney is back.
After several quarters of cutting costs and revamping its streaming business, CEO Robert Iger’s turnaround plans is paying off: On Thursday, the entertainment giant reported strong quarterly earnings and a robust outlook for the coming year.
- Revenue in the fiscal fourth quarter totaled $22.57 billion, topping the $22.45 billion expected by analysts, according to estimates compiled by LSEG.
- Adjusted earnings per share (EPS) jumped 39% year over year to $1.14, outpacing the $1.10 estimate, LSEG data showed.
Shares of Disney popped 10% on the results.