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Wednesday, April 10, 2024

Disney Exceeds Earnings Forecast, Boosts Dividends & Invests in Epic Games

Walt Disney Co, the all-American entertainment conglomerate, has astoundingly outperformed expectations in its fiscal first quarter. 

While market analysts skeptically peered into the company’s financial visage, outlining its grapple with declining linear TV business, slower growth in its parks business, and losses in streaming, Disney not only beat the earnings estimates but also announced an injection of buoyancy into its cash dividends by 50%.

Affect Investors, Benefit Shareholders

Despite the slight miss on revenue expectations, amounting to $23.5 billion against the anticipated $23.8 billion, Disney has eased investors’ nerves by penetrating the market’s forecast of $0.99 to report an adjusted earnings of $1.22 a share. 

Disney shareholder
Credit: DepositPhotos

In fact, the company is sketching an encouraging financial picture for fiscal 2024, with a projected earnings increase of at least 20% versus 2023.

Alongside this, Disney pronounced the rise of its cash divided to $0.45 a share, a 50% surge against the last dividend credited in January. Cues indicate the soaring benefits to shareholders as the dividend gets set to become payable in July.

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Cost-Cutting Measures and Buybacks

Disney CEO, Bob Iger, determinedly vows to take on the challenges at hand. The firm commits to meet or exceed its $7.5 billion annualized savings goal by the end of fiscal 2024, continually scanning the horizon for further efficiency opportunities. 

In addition, the board has sanctioned a new share repurchase program, with an aim to target $3 billion in purchases in fiscal 2024.

An Surprising Alliance With a Gaming Giant

In an unanticipated move stirring the financial markets, Disney uncovered its plans to invest $1.5 billion in Fortnite creator, Epic Games. The after-hours trading market responded jubilantly to the news, with Disney’s shares escalating by approximately 8%.

“Our new relationship with Epic Games will create a transformational games and entertainment universe that integrates Disney’s world-class storytelling into Epic’s cultural phenomenon, Fortnite, enabling consumers to play, watch, create, and shop for both digital and physical goods,” the CEO Bob Iger said on the earnings call.

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Streaming Division: Losses Narrow Down, Subscribers Tumble

The entertainment division’s streaming losses contracted to $138 million from a considerable $984 million loss in the previous year after the firm increased streaming prices. 

Disney+ App
Credit: DepositPhotos

Meanwhile, Disney+ core subscribers experienced a slight tumble due to the price hikes.

Regardless of this setback, Disney expects to add between 5.5 million and 6 million core users in the second quarter, spurred by an ongoing positive shift in average revenue per user. 

It predicts sustained growth in average revenue per user, following a notable sequential increase of $0.14 in core Disney+ ARPU compared to the fourth quarter.

Disney’s intent towards profitability in its combined streaming businesses by the fourth quarter of fiscal 2024 stands bold, as the company believes this segment will be a principal catalyst for its earnings growth.

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