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Warner Bros. Discovery (WBD) Cuts FY23 Profit Outlook by $500M
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Warner Bros. Discovery (WBD - Free Report) is revising its 2023 financial guidance in an attempt to navigate the challenges posed by the ongoing strikes in the entertainment industry by the Writers Guild of America (WGA) and Screen Actors Guild – American Federation of Television and Radio Artists (SAG-AFTRA).
The WGA went on strike on May 2, 2023, followed by SAG-AFTRA on Jul 14, 2023. The strikes are lobbying for fair pay, protection against artificial intelligence and more.
In a filing with the Securities and Exchange Commission, the company has guided lower adjusted EBITDA for the full year in the range of $10.5-$11 billion due to the strikes' continued impact. This reflects a negative impact of approximately $300 million to $500 million, primarily due to the ongoing strikes affecting the timing and performance of the 2023 film slate and content production.
On its Aug 3, 2023 earnings call, the company provided financial guidance for the year 2023, assuming that the strikes would be resolved by early September.
WBD is raising its free cash flow expectations for the full year to at least $5 billion. The company also anticipates exceeding $1.7 billion in free cash flow for the third quarter of 2023, partly due to the strong performance of the Barbie franchise and impact of the strikes on certain factors.
The company maintains its goal of achieving net leverage below 4.0x by the end of 2023 and a target gross leverage range of 2.5x-3.0x by the end of 2024.
Last month, Warner Bros. Discovery’s Dune: Part Two was knocked off the 2023 box-office slate due to the labor strikes that threatened its marketing abilities. The film moved from this fall to Mar 15, 2024, taking the calendar spot from Godzilla x Kong: The New Empire, which moved to Apr 12, 2024. The shuffle also saw the animated movie Lord of the Rings: The War of the Rohirrim move to Dec 13, 2024.
A majority of Americans support both strikes regardless of political affiliation, according to a poll conducted by Data For Progress. An estimated 67% of Americans support the strikes, while 18% are in opposition. The poll, which covered 1,124 respondents, indicated an estimated 59% of Americans have an unfavorable opinion of major Hollywood studios after they rejected demands by both unions.
WBD is committed to finding a fair resolution with the writers and actors' guilds and seeks to reach an agreement that respects their contributions.
The company plans to keep monitoring the situation and updating its financial assumptions based on the timing and any additional impacts resulting from the eventual resolution of the strikes.
The company is benefiting from the rise in total direct-to-consumer revenues, which increased 13.4% from the year-ago quarter to $2.73 billion in the second quarter of 2023. This trend is expected to continue in the third quarter of 2023. The Zacks Consensus Estimate for third-quarter revenues is pegged at $10.08 billion, indicating year-over-year growth of 2.57%.
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Warner Bros. Discovery (WBD) Cuts FY23 Profit Outlook by $500M
Warner Bros. Discovery (WBD - Free Report) is revising its 2023 financial guidance in an attempt to navigate the challenges posed by the ongoing strikes in the entertainment industry by the Writers Guild of America (WGA) and Screen Actors Guild – American Federation of Television and Radio Artists (SAG-AFTRA).
The WGA went on strike on May 2, 2023, followed by SAG-AFTRA on Jul 14, 2023. The strikes are lobbying for fair pay, protection against artificial intelligence and more.
In a filing with the Securities and Exchange Commission, the company has guided lower adjusted EBITDA for the full year in the range of $10.5-$11 billion due to the strikes' continued impact. This reflects a negative impact of approximately $300 million to $500 million, primarily due to the ongoing strikes affecting the timing and performance of the 2023 film slate and content production.
On its Aug 3, 2023 earnings call, the company provided financial guidance for the year 2023, assuming that the strikes would be resolved by early September.
WBD is raising its free cash flow expectations for the full year to at least $5 billion. The company also anticipates exceeding $1.7 billion in free cash flow for the third quarter of 2023, partly due to the strong performance of the Barbie franchise and impact of the strikes on certain factors.
The company maintains its goal of achieving net leverage below 4.0x by the end of 2023 and a target gross leverage range of 2.5x-3.0x by the end of 2024.
Warner Bros. Discovery, Inc. Price and Consensus
Warner Bros. Discovery, Inc. price-consensus-chart | Warner Bros. Discovery, Inc. Quote
Hollywood Strike Stings WBD’s Content Lineup
Last month, Warner Bros. Discovery’s Dune: Part Two was knocked off the 2023 box-office slate due to the labor strikes that threatened its marketing abilities. The film moved from this fall to Mar 15, 2024, taking the calendar spot from Godzilla x Kong: The New Empire, which moved to Apr 12, 2024. The shuffle also saw the animated movie Lord of the Rings: The War of the Rohirrim move to Dec 13, 2024.
A majority of Americans support both strikes regardless of political affiliation, according to a poll conducted by Data For Progress. An estimated 67% of Americans support the strikes, while 18% are in opposition. The poll, which covered 1,124 respondents, indicated an estimated 59% of Americans have an unfavorable opinion of major Hollywood studios after they rejected demands by both unions.
WBD is committed to finding a fair resolution with the writers and actors' guilds and seeks to reach an agreement that respects their contributions.
The company plans to keep monitoring the situation and updating its financial assumptions based on the timing and any additional impacts resulting from the eventual resolution of the strikes.
This Zacks Rank #3 (Hold) company is set to offer live-streaming news services via free ad-supported streaming TV channels. The company faces competition from well-established players like Fox (FOXA - Free Report) news, Cumulus Media’s (CMLS - Free Report) ABC news and Paramount Global’s (PARA - Free Report) CBS news. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company is benefiting from the rise in total direct-to-consumer revenues, which increased 13.4% from the year-ago quarter to $2.73 billion in the second quarter of 2023. This trend is expected to continue in the third quarter of 2023. The Zacks Consensus Estimate for third-quarter revenues is pegged at $10.08 billion, indicating year-over-year growth of 2.57%.