It was a nearly perfect start to Bob Iger's second tenure as Walt Disney's (DIS -2.48%) CEO. The media giant delivered better-than-expected fiscal first-quarter results after Wednesday's market close.
Disney is also serious about getting its overhead back in line. It expects to eventually realize $5.5 billion in annual cost savings, and that includes eliminating 7,000 jobs across the company in the near term. Despite reining in expenses, Iger will be asking Disney's board to reinstate its dividend -- gone since early 2020 -- by the end of this calendar year.
It wasn't all good news, though. Disney+ had 161.8 million subscribers by the end of December, 2.4 million less than it was entertaining three months earlier. This isn't a surprise, given the pricing increases that kicked in during early December but were announced a couple of months earlier.
The Disney+ zinger that did come as a surprise was that average monthly revenue per paid subscriber clocked in with a sequential dip. The 38% monthly rate increase for U.S. subscribers took place late in the quarter and should have a more material impact in the current fiscal second quarter. Disney's legacy networks saw its revenue decline 5%, with an even bigger 16% slide in operating profit.
The weak spots weren't enough to offset the well-received report. There was no shortage of analysts on the earnings call welcoming Iger back. The stock itself initially moved higher on the news.
Whistle while you work
Revenue rose 8% to $23.5 billion, just ahead of the top-line results that analysts were targeting. Disney served up an adjusted profit of $0.99 a share for the quarter -- down from $1.06 a share on a similar basis a year ago -- but that was even better news than the top-line beat. Wall Street pros were bracing for a 25% year-over-year plunge in adjusted earnings.
Once again we're seeing Disney's theme parks bailing out the top-line struggles with its media networks business and the bottom-line sandbags on the streaming end. Disney's segment that includes its gated attractions, cruise ships, and consumer products soared 21% during the holiday quarter. It helped lift the mere 1% increase that couldn't even keep up with inflation for the rest of Disney's collective enterprises.
Iger has a long punch list to tackle for what has initially been billed as a two-year stint at the helm of House of Mouse. He will be busy making sure he hands the company over to the next CEO in move-in condition.
Disney+ is losing a lot of money, but the operating-income hit narrowed sequentially from $1.5 billion to $1.1 billion in the fiscal first quarter. Iger mentioned that the streaming service is on track to turn a profit by the end of 2024, a goal the company set a long time ago but one that didn't seem likely with costs spinning out of control late last year.
Disney is no longer going to be publicly concerned about putting out subscriber goals, something that's probably easy to say when the audience counts are going the wrong way. Iger prefers to line up quality subscribers who Disney+ can entertain profitably.
Another morsel from the earnings call is that Toy Story, Frozen, and Zootopia all have sequels in the works. The first two franchises are no-brainers, but Zootopia also makes sense.
The original animated feature may not have had the same kind of box-office success as the other two Disney-rendered classics, but there's already a Zootopia-themed land opening at Shanghai Disneyland. A Zootopia-themed area is also in consideration for Disney's Animal Kingdom in Florida. Disneyland will be getting an Avatar experience, a move that also makes sense, given the theatrical success of Avatar: The Way of Water (and with a few more sequels slated to come out in the coming years).
Turning to Disney's media business, it announced that its two operating segments would now become three. It plans to break out ESPN -- covering the namesake channel, as well as all of the company's sports broadcasting properties -- into its own subsidiary. Asked if this was the first step to eventually unloading the high-cost enterprise, Iger conceded that the board had considered selling ESPN while he was away, but cutting the sports programming juggernaut isn't on the table anymore.
We're just three months into Iger's return, and a turnaround is within sight for the popular media stock. Even when he's announcing layoffs or tap dancing around managing the number of annual passholders allowed on any given day to give higher-paying visitors on one-day tickets a good experience, reality checks just sound better coming from someone who shareholders and enthusiasts trust and respect.
