The Walt Disney Company (DIS -0.12%), one of the world's biggest entertainment and theme parks businesses, today reported earnings that topped forecasts, leading it to raise its 2024 earnings outlook. But investors were disappointed by indications of slower growth in key parts of the company.
For the fiscal second-quarter ended March 30, adjusted earnings per share (EPS) rose to $1.21 from $0.93 in the year-earlier quarter. That topped analyst estimates of $1.10. Revenue rose about 1% to $22.1 billion, just shy of Wall Street projections.
Including one-time items for restructuring and impairments, the company reported a net loss of $20 million, or EPS of minus $0.1, compared with profit of $1.27 billion, or $0.69, in the prior year.
But the company also told investors that business in its experiences division, which includes theme parks and cruise ships, would moderate in the current quarter and would be "roughly comparable to the prior year," the company said in a statement. Disney shares fell as much as 11%.
| Metrics | Q1 2024 | Estimates | Q1 2023 | YoY Change |
|---|---|---|---|---|
| Revenue | $22,083 million | $22,121 million | $21,815 million | 1% |
| EPS (Diluted) | $1.21 | $1.10 | $0.93 | 30% |
| Total Segment Operating Income | $3,845 million | - | $3,285 million | 17% |
| Free Cash Flow | $2,407 million | - | $1,987 million | 21% |
Data sources: Company results from company. Analyst estimates from FactSet.
Understanding Disney
Disney is an entertainment conglomerate, best known for its theme parks, catalog of films and characters, and more recently direct-to-consumer streaming services like Disney+.
In recent years, Disney has focused on its streaming platforms, including Disney+, ESPN+, and Hulu. The growth of these platforms and the recovery of theme park visitations post-pandemic play critical roles in the company's overall strategy.
Quarterly highlights
Disney's total segment operating income rose 17% because of gains in two of its main businesses -- sports and experiences. Moreover, the direct-to-consumer segment recorded a 13% revenue growth, pointing to the appeal of Disney's streaming services. A significant driver of Disney's performance this quarter was the continued recovery and expansion in its theme parks and resorts, which enjoyed a 10% increase in revenue. The result led management to raise its full-year EPS growth estimate to 25% from an earlier projection of 20% for 2024.
The entertainment segment faced challenges, however, with a 5% decline in revenue, underscoring the competitive and changing nature of the entertainment industry. Disney is counting on investments in its content library and theme parks to overcome this shortfall.
One bright spot was Disney's cost management and operational efficiencies, which contributed to a 21% increase in free cash flow, or what's left of cash flow after capital investments.
Future outlook
Disney plans to focus on content creation, digital expansion, and international market penetration. It plans to invest $60 billion in its theme parks and resorts over the next decade. Moreover, Disney anticipates its streaming services will reach profitability by the end of the fiscal year 2024.
Investors should keep an eye on Disney's ability to sustain its streaming service growth, navigate the competitive entertainment landscape, and realize the potential of its investments in theme parks and streaming platforms.
