Investors know a lot more about Walt Disney's (DIS -0.56%) near-term plans than they did a week ago. Bob Iger -- presiding over his first earnings call in three years since his return to the throne at the king of all media -- offered plenty of insight following Wednesday's fiscal first-quarter report.
He offered up timelines for when Disney will resume paying its dividend and for when investors can expect its essential but cash-draining streaming services to turn profitable. Iger has Disney's fan base as well as its shareholder base energized. A lot of good things can happen to both camps if he's able to deliver on his game plan.
Image source: Disney.
There's a great big beautiful tomorrow
A year from now we'll be midway through the 2024 fiscal second quarter, and a lot will be different by then. The payouts should be back. Iger said on Wednesday of last week that Disney expects to bring back its semiannual distributions by the end of this calendar year, so at some point during the fiscal first quarter of 2024 that ends in December.
The dividend won't be much. The old rate translates to a yield of 1.6%, but the reinstated payouts will likely be lower. Disney is expected to earn less in fiscal 2024 than it did in fiscal 2019 when it declared its last distribution. However, it's the one thing that will definitely be different for shareholders than the present ownership experience.
Disney will also likely have a pared back its workforce a year from now. It announced last week that it will be laying off 7,000 cast members, part of a larger plan to shave $5.5 billion in annual expenses.
The biggest part of the cost-trimming will be a $3 billion reduction in the money spent on non-sports content. How much of this will come from scaling back theatrical releases, Disney+ originals, or content for its traditional media networks? The incisions will be critical, as Hollywood has historically been about spending money to make money. Can it get the balance right? It just increased the monthly price for its ad-free Disney+ by a whopping 38% two months ago. Subscribers will expect more content, not less.
One of Iger's boldest projections is that Disney+ will be profitable by the end of fiscal 2024. The media giant's streaming business has generated an operating loss of $2.6 billion over just the past two quarters. It would be a pretty big boost to its bottom line if the segment was adding to Disney's profitability rather than subtracting substantially from it by the fall of next year.
Disney will still want to keep cranking out hits. It has at least three Avatar sequels planned for the next few years, including the third entry in the series slated to hit a multiplex near you in the 2024 holiday season. After a rough 2022 for Disney's animation studio following a couple of noteworthy box office flops, Iger confirmed that sequels were in the works for Toy Story, Frozen, and Zootopia.
Theme parks have been a big driver in Disney's post-pandemic recovery, and the iconic gated attractions will bear watching a year from now. The only major ride addition at its domestic theme parks currently slated for the 2024 calendar year is the Splash Mountain transformation into Tiana's Bayou Adventure. Iger mentioned that leaning on its successful franchises to increase guest capacity at its theme parks is important, but outside of mentioning that an Avatar-themed "experience" was in the works for Disneyland he was light on details for Disney World and the original Disneyland resort. Watchers will probably have more pages in the public playbook a year from now, especially for Florida where Disney's biggest rival will be opening what should be a bar-raising theme park in 2025.
Put it all together and Disney should have more answers than questions a year from now. Investors will appreciate that. The market will accept a slowdown in Disney+ subscribers if it means the media stock's streaming business is finally financially sustainable. Investors will also have a clearer picture on where the economy stands a year from now. Did we dodge a recession? If we're not in an economic funk and Iger is making headway on his goals it's easy to see Disney stock beating market over the next 12 months. After back-to-back calendar years of double-digit percentage stock declines, Disney is well positioned to return as a market leader.
