Disney Stock Falls on Weak Parks Outlook, TV Business Decline

by 24USATVMay 7, 2024, 10:01 p.m. 24

Disney‘s adjusted earnings per share for the March quarter beat Wall Street forecasts — but the company’s stock price stumbled amid concerning signs for the Mouse House.

Shares of Disney were down 10.4%, to $104.41/share, as of noon ET on Tuesday, before closing at $105.39/share (down 9.5% for the day). The pullback comes after the stock was up 29% year to date as of Monday.

While Disney’s theme parks business drove top- and bottom-line growth for the first three months of 2024 — with revenue growth of 10% and segment operating income up 12% — the company said the June quarter’s segment operating income is expected to come in roughly comparable to the prior year, with revenue flat.

On the earnings call, CFO Hugh Johnston told analysts, “While consumers continue to travel in record numbers and we are still seeing healthy demand, we have seen some evidence of a global moderation from peak post-COVID travel” at Disney’s theme parks. He also said rising costs and “demand impacts” will likely cut into the segment’s profits but that the business is expected to rebound in the September quarter.

“While pressures from wages, reopening costs and demand impacts are expected to persist in [fiscal] Q4, we do expect year-over-year Experiences operating income growth to rebound significantly in the fourth quarter,” Johnston said. The parks business also will see some “one-time expenses” in the June and September quarters. Backing out those one-time costs, Disney expects operating income in fiscal Q3 to be in the mid-to-high single-digit range and to increase double-digits for Q4.

For the March quarter, the increase in operating income at the company’s domestic parks and experiences was due to higher results at Walt Disney World Resort and Disney Cruise Line, partially offset by lower results at Disneyland Resort.

Meanwhile, revenue for Disney’s linear TV business (excluding ESPN) declined 8%, falling to $2.77 billion, while operating income fell 22%, to $752 million — below analyst expectations. In the U.S., Disney attributed the decrease in operating income to “the impact of the nonrenewal of carriage of certain networks by an affiliate” (a reference to Charter dropping eight cable networks last fall) and a decline in ad revenue reflecting lower average viewership.

CEO Bob Iger, on the earnings call, said that in the March quarter, series that aired on Disney’s linear networks accounted for 17 of the top 20 most-viewed series on its streaming platforms, with almost 3 billion hours of consumption. “Our linear channels are deeply embedded in our direct-to-consumer strategy, as they continue to deliver high-quality content that reaches demographics not captured on streaming alone, allowing us to broaden our audiences and leverage our unmatched content engine across an expansive base,” he said.

And while Disney’s fiscal Q2 results showed progress toward the company finally achieving profitability in streaming — with its Disney+ and Hulu segment reporting its first-ever operating profit — the company anticipates a loss for the entertainment streaming segment because of declines at Disney+ Hotstar, the service it offers in India and other Southeast Asian countries.

On the call, Iger said Disney has said the company’s “path to profitability” on streaming would not be “linear.”

In addition, Disney swung to a net loss for the quarter because of a one-time $2.05 billion charge for goodwill impairments related to Star India and unspecified “entertainment linear networks.” The impairment at Star India was a result of the company’s deal with Reliance Industries to merge Star India operations with Reliance’s Viacom18 in a new joint venture.


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