Disney (DIS) reported fiscal fourth quarter earnings after the bell on Wednesday that beat expectations as the company increased its annual cost cutting goal to $7.5 billion, up from the previous $5.5 billion set in February. That includes a $4.5 billion annualized cut to content spending, up from the prior $3 billion.
The company’s streaming figures came in much strong than expected with nearly 7 million core Disney+ net additions, compared to consensus calls of 2.68 million.
Streaming losses narrowed to $387 million from a loss of $1.41 billion in the prior year period after the company raised streaming prices for the second time this year, upping the monthly price of its ad-free Disney+ and Hulu plans by more than 20%.
Analysts polled by Bloomberg had expected direct-to-consumer losses to mount to $454 million in the quarter. The company previously reported a loss of $512 million in Q3, a $659 million loss in Q2 and a $1.1 billion loss in Q1.
The results follow the official reveal of Disney’s next CFO and commitment to purchase Comcast’s 33% stake in Hulu.
On the earnings call, the company said it expects free cash flow to balloon to $8 billion in full-year 2024, assisted by lower content spend. Disney expects to spend $25 billion on content next year versus the $27 billion spent in full-year 2023.
It will also recommend a dividend by the end of the calendar year. Shares climbed more than 3% in after-hours trading following the results.
“We continue to expect that our combined streaming businesses will reach profitability in Q4 of FY24, although progress may not look linear from quarter to quarter,” the company said in the release.
Adjusted earnings of $0.82 a share beat expectations of $0.69 per share and was more than double the prior-year period’s earnings per share of $0.30. Revenue, meanwhile, slightly missed estimates of $21.43 billion to hit $21.24 billion, up 5% compared to the prior-year quarter’s $20.15 billion.
Wednesday’s results mark the first time the media giant delivered earnings under its new reporting structure after CEO Bob Iger reorganized the company into three core business segments: Disney Entertainment, which includes its entire media and streaming portfolio; Experiences, which encompasses the parks business; and Sports, which included ESPN networks and ESPN+.
Here’s how those individual segments performed in the quarter versus Wall Street consensus estimates compiled by Bloomberg:
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Entertainment revenue: $9.52 billion versus $9.77 billion expected
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Sports revenue: $3.91 billion versus $3.89 billion expected
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Experiences revenue: $8.16 billion versus $8.20 billion expected
Disney’s stock has struggled, down about 3% since the start of the year and down 5% since Iger’s return. Shares hit a nine-year low last month, and activist investor Nelson Peltz launched yet another attack on the media giant.
In an interview with CNBC following the earnings release, CEO Bob Iger said he’s had a call with Peltz but doesn’t have specifics on what the activist investor ultimately wants.
The executive did address the stock price, however, saying, “We don’t manage the stock price for short term gains or on a short term basis. We have a longterm view and this past year has been spent fixing things that needed to be addressed. …The longterm picture for Disney shareholders is quite bright.”
Iger said an integrated Hulu and Disney+ app will launch in March 2024 and that ESPN will transition to streaming “no later than 2025.”
The company is currently seeking strategic partners, either through a joint venture or part ownership, to enable ESPN to launch a new direct-to-consumer (DTC) service.
ESPN generated operating income of $953 in the quarter, up 15% compared to the prior year — largely driven by its domestic business.
The company credited higher domestic ESPN operating results to a decrease in programming and production costs, growth in ESPN+ subscription revenue due to price increases and subscriber gains, a modest increase in advertising revenue, and a decrease in affiliate revenue amid the Charter dispute in September.
Standalone linear network revenue continued to struggle, declining 9% in the quarter with domestic operating income falling 5% amid an especially weak advertising market, echoing the results of competitors. Disney said the Hollywood strikes were also to blame.
ESPN is less than 60% of total linear networks revenue, or roughly 30% of operating income.
Disney’s Experiences division, which includes its parks, cruise lines and consumer products, saw revenue leap 13% year-over-year in the quarter to hit $8.16 billion. Operating income came in at $1.76 billion, below estimates of $1.87 billion but 30% above Q4 2022’s $1.34 billion total.
The company said lower results at its domestic parks and resorts stemmed from a decrease at Walt Disney World Resort due to inflation and lower guest spending.
Disney plans to invest $60 billion into its theme parks business over the next 10 years. Most of its full-year 2024 domestic parks growth will be in the second half of the year, the company said.
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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