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Disney (DIS) Q2 Earnings Beat Estimates, Revenues Rise Y/Y
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The Walt Disney Company (DIS - Free Report) reported second-quarter fiscal 2024 adjusted earnings of $1.21 per share, which beat the Zacks Consensus Estimate by 8.04% and increased 30.1% year over year.
Revenues rose 1.2% year over year to $22.08 billion but missed the consensus mark by 0.23%.
Shares of Disney have gained 16.7% year to date against the Zacks Consumer Discretionary sector’s decline of 2.8%.
The Walt Disney Company Price, Consensus and EPS Surprise
Media and Entertainment Distribution revenues (44.4% of revenues) decreased 5% year over year to $9.79 billion.
Revenues from Linear Networks declined 7.8% year over year to $2.76 billion. Direct-to-Consumer revenues increased 13.2% year over year to $5.64 billion. Content Sales/Licensing and Other revenues plunged 40.3% year over year to $1.38 billion.
Parks, Experiences and Products revenues (38% of revenues) increased 9.8% year over year to $8.39 billion. Domestic revenues were $5.95 billion, up 6.9% year over year. International revenues jumped 28.5% year over year to $1.52 billion in the reported quarter.
Meanwhile, revenues from Disney’s Consumer Products rose 2.6% year over year to $913 million.
Subscriber Details
Disney+, as of Mar 31, 2024, had 117.6 million paid subscribers compared with 111.3 million as of Dec 31, 2023.
Domestic Disney+ average monthly revenue per paid subscriber decreased from $8.15 to $8, primarily due to a higher mix of wholesale subscribers, partially offset by increases in retail pricing.
International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber increased from $5.91 to $6.66 due to improvements in retail pricing and a lower mix of subscribers to promotional offerings.
Disney+ Hotstar’s average monthly revenue per paid subscriber decreased from $1.28 to 70 cents due to lower advertising revenue.
Meanwhile, DIS’ Hulu ended the quarter with 50.2 million paid subscribers, up from 49.7 million reported in the previous quarter.
Hulu SVOD Only average monthly revenue per paid subscriber decreased from $12.29 to $11.84 due to lower advertising revenues, partially offset by increases in retail pricing.
Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $93.61 to $95.01, primarily due to increases in retail pricing and a lower mix of subscribers to promotional offerings, partially offset by lower advertising revenues.
ESPN+ had 24.8 million paid subscribers at the end of the fiscal second quarter compared with 25.2 million at the end of the previous quarter.
The average monthly revenues per paid subscriber for ESPN+ grew 12% year over year to $6.30, driven by a rise in retail pricing and higher advertising revenues.
Operating Details
Costs & expenses decreased 1.7% year over year to $19.2 billion in the reported quarter.
Segmental operating income was $3.84 billion, up 17% year over year.
Media and Entertainment Distribution’s segmental operating income surged 71.6% year over year to $781 million.
Linear Networks’ operating income decreased 21.6% to $752 million. Domestic operating income declined due to lower advertising revenues attributable to a decrease in impressions reflecting lower average viewership, partially offset by higher rates. Lower international operating income was due to a decline in affiliate revenues, primarily attributable to fewer subscribers and contractual rate decreases.
Direct-to-Consumer operating income was $47 million against the year-ago quarter’s loss of $587 million. The improvement was driven by a rise in subscription revenues attributable to higher rates due to increases in retail pricing across the company’s streaming services and subscriber growth at Disney+ Core.
Content Sales/Licensing and Other operating losses were $18 million against an operating income of $83 million reported in the year-ago quarter. The decrease in operating results was due to a lack of significant titles released in the reported quarter compared with Ant-Man and the Wasp: Quantumania in the prior-year quarter. The year-ago quarter also included the benefit of the ongoing performance of Avatar: The Way of Water, which was released in December 2022.
Parks, Experiences and Products’ operating income was $2.28 billion, up 12.3% year over year.
The Domestic segment reported an operating income of $1.6 billion, up 5.9% year over year due to higher results at Walt Disney World Resort and Disney Cruise Line, partially offset by lower results at Disneyland Resort.
At Walt Disney World Resort, the company witnessed increased guest spending attributable to higher average ticket prices and higher costs due to inflation, partially offset by lower depreciation and cost-saving initiatives. Growth at Disney Cruise Line was due to an increase in average ticket prices, partially offset by higher costs.
Disneyland Resort witnessed a decrease in operating results because of higher costs due to inflation, partially offset by an increase in guest spending attributable to higher average ticket prices and daily hotel room rates.
The International segment reported an operating income of $292 million, up 87.2% year over year, primarily due to an increase in operating results at Hong Kong Disneyland Resort attributable to guest spending growth due to improvements in average ticket prices and food, beverage and merchandise spending. Volume growth benefited from additional days of operations in the quarter, as well as the opening of World of Frozen in November 2023.
Consumer Products’ operating profit increased 7.2% year over year to $387 million, driven by higher game licensing revenues.
Balance Sheet
As of Mar 31, 2024, cash and cash equivalents were $6.635 billion compared with $7.19 billion as of Dec 31, 2023.
Total borrowings were $39.51 billion as of Mar 31, 2024, compared with $47.68 billion as of Dec 31, 2023.
Free cash flow was $2.407 billion in the reported quarter compared with $886 million in the previous quarter. The company repurchased $1 billion worth of shares in the fiscal second quarter.
Guidance
The company does not expect to see core subscriber growth at Disney+ in the fiscal third quarter but anticipates improvements in the fiscal fourth quarter. Disney is forecasting a loss for Entertainment DTC in the third quarter.
For the fiscal third quarter, DIS expects the Entertainment Linear Networks business to generate modestly positive operating income.
Disney continues to expect robust operating income growth at Experiences for the full year. However, fiscal third-quarter operating income is expected to come in roughly comparable to the prior year.
The company expects to meet or exceed the $7.5 billion annualized savings target by the end of fiscal 2024.
Disney expects full-year fiscal 2024 earnings per share (EPS), excluding certain items, to increase at least 25% from fiscal 2023. DIS continues to expect free cash flow generation in fiscal 2024 to be roughly $8 billion.
The company continues to expect the combined streaming businesses to reach profitability in the fourth quarter of fiscal 2024.
Roblox is scheduled to report first-quarter 2024 results on May 9. The Zacks Consensus Estimate for RBLX’s first-quarter loss per share has widened by a penny to 53 cents over the past 30 days.
SharkNinja is set to report first-quarter 2024 results on May 9. The Zacks Consensus Estimate for SN’s EPS is pegged at 95 cents, up 4.4% over the past 30 days.
Take-Two is slated to report first-quarter 2024 results on May 16. The Zacks Consensus Estimate for TTWO’s EPS is pegged at 22 cents, which has remained unchanged over the past 30 days.
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Disney (DIS) Q2 Earnings Beat Estimates, Revenues Rise Y/Y
The Walt Disney Company (DIS - Free Report) reported second-quarter fiscal 2024 adjusted earnings of $1.21 per share, which beat the Zacks Consensus Estimate by 8.04% and increased 30.1% year over year.
Revenues rose 1.2% year over year to $22.08 billion but missed the consensus mark by 0.23%.
Shares of Disney have gained 16.7% year to date against the Zacks Consumer Discretionary sector’s decline of 2.8%.
The Walt Disney Company Price, Consensus and EPS Surprise
The Walt Disney Company price-consensus-eps-surprise-chart | The Walt Disney Company Quote
Segment Details
Media and Entertainment Distribution revenues (44.4% of revenues) decreased 5% year over year to $9.79 billion.
Revenues from Linear Networks declined 7.8% year over year to $2.76 billion. Direct-to-Consumer revenues increased 13.2% year over year to $5.64 billion. Content Sales/Licensing and Other revenues plunged 40.3% year over year to $1.38 billion.
Parks, Experiences and Products revenues (38% of revenues) increased 9.8% year over year to $8.39 billion. Domestic revenues were $5.95 billion, up 6.9% year over year. International revenues jumped 28.5% year over year to $1.52 billion in the reported quarter.
Meanwhile, revenues from Disney’s Consumer Products rose 2.6% year over year to $913 million.
Subscriber Details
Disney+, as of Mar 31, 2024, had 117.6 million paid subscribers compared with 111.3 million as of Dec 31, 2023.
Domestic Disney+ average monthly revenue per paid subscriber decreased from $8.15 to $8, primarily due to a higher mix of wholesale subscribers, partially offset by increases in retail pricing.
International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber increased from $5.91 to $6.66 due to improvements in retail pricing and a lower mix of subscribers to promotional offerings.
Disney+ Hotstar’s average monthly revenue per paid subscriber decreased from $1.28 to 70 cents due to lower advertising revenue.
Meanwhile, DIS’ Hulu ended the quarter with 50.2 million paid subscribers, up from 49.7 million reported in the previous quarter.
Hulu SVOD Only average monthly revenue per paid subscriber decreased from $12.29 to $11.84 due to lower advertising revenues, partially offset by increases in retail pricing.
Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $93.61 to $95.01, primarily due to increases in retail pricing and a lower mix of subscribers to promotional offerings, partially offset by lower advertising revenues.
ESPN+ had 24.8 million paid subscribers at the end of the fiscal second quarter compared with 25.2 million at the end of the previous quarter.
The average monthly revenues per paid subscriber for ESPN+ grew 12% year over year to $6.30, driven by a rise in retail pricing and higher advertising revenues.
Operating Details
Costs & expenses decreased 1.7% year over year to $19.2 billion in the reported quarter.
Segmental operating income was $3.84 billion, up 17% year over year.
Media and Entertainment Distribution’s segmental operating income surged 71.6% year over year to $781 million.
Linear Networks’ operating income decreased 21.6% to $752 million. Domestic operating income declined due to lower advertising revenues attributable to a decrease in impressions reflecting lower average viewership, partially offset by higher rates. Lower international operating income was due to a decline in affiliate revenues, primarily attributable to fewer subscribers and contractual rate decreases.
Direct-to-Consumer operating income was $47 million against the year-ago quarter’s loss of $587 million. The improvement was driven by a rise in subscription revenues attributable to higher rates due to increases in retail pricing across the company’s streaming services and subscriber growth at Disney+ Core.
Content Sales/Licensing and Other operating losses were $18 million against an operating income of $83 million reported in the year-ago quarter. The decrease in operating results was due to a lack of significant titles released in the reported quarter compared with Ant-Man and the Wasp: Quantumania in the prior-year quarter. The year-ago quarter also included the benefit of the ongoing performance of Avatar: The Way of Water, which was released in December 2022.
Parks, Experiences and Products’ operating income was $2.28 billion, up 12.3% year over year.
The Domestic segment reported an operating income of $1.6 billion, up 5.9% year over year due to higher results at Walt Disney World Resort and Disney Cruise Line, partially offset by lower results at Disneyland Resort.
At Walt Disney World Resort, the company witnessed increased guest spending attributable to higher average ticket prices and higher costs due to inflation, partially offset by lower depreciation and cost-saving initiatives. Growth at Disney Cruise Line was due to an increase in average ticket prices, partially offset by higher costs.
Disneyland Resort witnessed a decrease in operating results because of higher costs due to inflation, partially offset by an increase in guest spending attributable to higher average ticket prices and daily hotel room rates.
The International segment reported an operating income of $292 million, up 87.2% year over year, primarily due to an increase in operating results at Hong Kong Disneyland Resort attributable to guest spending growth due to improvements in average ticket prices and food, beverage and merchandise spending. Volume growth benefited from additional days of operations in the quarter, as well as the opening of World of Frozen in November 2023.
Consumer Products’ operating profit increased 7.2% year over year to $387 million, driven by higher game licensing revenues.
Balance Sheet
As of Mar 31, 2024, cash and cash equivalents were $6.635 billion compared with $7.19 billion as of Dec 31, 2023.
Total borrowings were $39.51 billion as of Mar 31, 2024, compared with $47.68 billion as of Dec 31, 2023.
Free cash flow was $2.407 billion in the reported quarter compared with $886 million in the previous quarter. The company repurchased $1 billion worth of shares in the fiscal second quarter.
Guidance
The company does not expect to see core subscriber growth at Disney+ in the fiscal third quarter but anticipates improvements in the fiscal fourth quarter. Disney is forecasting a loss for Entertainment DTC in the third quarter.
For the fiscal third quarter, DIS expects the Entertainment Linear Networks business to generate modestly positive operating income.
Disney continues to expect robust operating income growth at Experiences for the full year. However, fiscal third-quarter operating income is expected to come in roughly comparable to the prior year.
The company expects to meet or exceed the $7.5 billion annualized savings target by the end of fiscal 2024.
Disney expects full-year fiscal 2024 earnings per share (EPS), excluding certain items, to increase at least 25% from fiscal 2023. DIS continues to expect free cash flow generation in fiscal 2024 to be roughly $8 billion.
The company continues to expect the combined streaming businesses to reach profitability in the fourth quarter of fiscal 2024.
Zacks Rank & Stocks to Consider
Disney currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Consumer Discretionary sector are Roblox (RBLX - Free Report) , SharkNinja, Inc. (SN - Free Report) and Take-Two Interactive Software (TTWO - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Roblox is scheduled to report first-quarter 2024 results on May 9. The Zacks Consensus Estimate for RBLX’s first-quarter loss per share has widened by a penny to 53 cents over the past 30 days.
SharkNinja is set to report first-quarter 2024 results on May 9. The Zacks Consensus Estimate for SN’s EPS is pegged at 95 cents, up 4.4% over the past 30 days.
Take-Two is slated to report first-quarter 2024 results on May 16. The Zacks Consensus Estimate for TTWO’s EPS is pegged at 22 cents, which has remained unchanged over the past 30 days.