All eyes are on the House of Mouse this week. Walt Disney (DIS +0.54%) reports its fiscal third-quarter results after Wednesday's market close, hosting its earnings call shortly after the release goes out. This will be CEO Bob Iger's first quarterly call since having his tenure extended another two years through the end of 2026.
Expectations aren't high for the company's financial performance. It's a rough time for media companies that lean on linear-TV ad revenue, profitless streaming operations, and box office receipts. Even Disney's resilient theme parks are experiencing a perfect storm of headwinds this scorching-hot summer.
The real test here will be what Iger has to say about the present and the future. Let's go over a few things that would be great to hear from him.
NYSE: DIS
Key Data Points
1. "Let me revisit some comments I made about Hollywood."
Iger became the unlikely face of movie studios as writers and, eventually, actors went on strike. Some of his comments were fair, arguing that this was a terrible time for disruption with traditional media networks shedding viewers and streaming services failing to turn a profit. But he made himself a popular target for those supporting the strike when he called the demands unrealistic.
Iger isn't typically a polarizing personality. As someone who was widely reported to be considering running for political office after he initially retired in early 2020, Iger typically knows the right thing to say to please all sides.
Calling the union's position "not realistic," when actors are talking about theft of their digital likeness and writers face the threat of obsolescence in the AI era, made Iger a popular target for industry leaders. He needs a do-over to make things right, and Wednesday afternoon's earnings call is a smart time to wield an olive branch.
Image source: Disney.
2. "The future of Disney World is bright."
Last time, there was a crack in the narrative of Disney World being in a state of perpetual growth. The company surprised investors three months ago when it said that operating income at its domestic theme parks declined in the fiscal second quarter (ending in March) when compared to the prior year. Attendance rose 7% and per-capita spending inched 2% higher, but it wasn't enough to offset rising costs.
With Disney World ending its 18-month celebration of the resort turning 50 in March, it warned that it was seeing a slowdown in the fiscal third quarter, as it historically does after these anniversary events. Several news media reports and even local tourist-tax collection rates suggest that the three months ending in June did not go well.
These lulls happen, but it's particularly painful since Disney rival Comcast (CMCSA +2.74%) continues building out Epic Universe to expand its Orlando resort. The new theme park is on track to open in 2025, and with its next-gen thrills that raise the bar, it's going to be difficult for Disney World to stand out in two years.
Iger won't announce that Disney World is developing a new theme park to compete with Epic Universe during this week. These announcements are saved for enthusiast and media events. But with Disney wrapping up its latest round of theme park additions -- and continuing to cut $5.5 billion in annualized companywide expenses -- Iger needs to give investors hope that the world's leading operator of gated attractions understands the assignment. It can't sleep on Epic Universe.
3. "We are declaring our first dividend in three years."
There is a lot that Iger can say about potential asset sales and recent theatrical-release duds. But one can't forget that Disney mentioned in its February call that it was planning to bring back its cash dividend for shareholders before the end of 2023.
Talking about a payout might seem like a mistake. Two content-creator unions are on strike. Disney has gone through layoffs, part of a larger plan for shaving overhead.
So handing some of the money it's not spending elsewhere to shareholders could seem cruel. However, since it was already promised earlier this year, it could be a way for Disney shares to break out of their languishing ways.
Disney has been off the investing radar for institutional investors managing income-generating portfolios. Some individual investors might also be staying away until the payouts that were suspended at the start of the COVID crisis resume. It would be a sign that the media stock is almost back to business as usual.
Management mentioned that the dividend should return by the end of the calendar year, so it doesn't have to happen now as we are waist-deep in Disney's fiscal fourth quarter. However, since it didn't mention the dividend return at all in the May earnings call, it's probably time for an update.
