Walt Disney's stock soars on strong results ahead of face-off with Peltz

By Thomas Buckley

Walt Disney Co. shares rose as much as 10.5%, the biggest intraday gain since Dec. 2020, after reporting better-than-expected earnings for its fiscal first quarter.  
 

The entertainment giant issued an upbeat profit outlook for the year, giving Chief Executive Officer Bob Iger ammunition to deflect proxy challenges at its shareholder meeting this spring.

Earnings rose to $1.22 a share, excluding some items, Disney said Wednesday in a statement. That beat the 99-cent average of Wall Street estimates.

Revenue was little changed at $23.5 billion in the period ended Dec. 30 and just shy of the $23.8 billion average of estimates compiled by Bloomberg, held back by Disney’s struggling TV business and two theatrical misses, The Marvels and Wish. 

Disney shares rose 9.5% to $108.55 at 9:40 a.m. in New York. 

Thanks to cost cutting, Disney said profit this year will rise at least 20% to about $4.60 a share, topping estimates of $4.27. The strong results stand to help Iger help fend off activist investor Trian Fund Management LP, which has nominated its founder Nelson Peltz and former Disney finance chief Jay Rasulo to the entertainment giant’s board. 

In a nod to investors, Burbank, California-based Disney raised its dividend by 50% to 45 cents a share and approved a $3 billion stock repurchase program for the year. 

Shares of Disney gained 7.8% in premarket trading before New York exchanges opened on Thursday, which would be the biggest intraday gain since November if it holds at the open. The company also announced it’s acquiring a $1.5 billion stake in Epic Games Inc. as part of a collaboration with the company that makes the popular Fortnite title.

Subscribers to the Disney+ streaming service fell to 149.6 million in the quarter, missing analysts’ projections of 151.2 million, while overall losses in streaming, including Hulu and ESPN+, shrank to $216 million from $1.05 billion a year ago.

However, the company expects to add as many as 6 million core Disney+ subscribers this period and continues to predict its streaming operation will reach profitability by the fourth quarter of the current fiscal year. 

The bright spot for Disney last quarter was its international parks, where profit rose more than fourfold and sales increased 35% from last year, when Covid closures were still in place. That more than countered a modest 4% gain in revenue at its domestic resorts and a 2% drop in profit, with attendance falling at Walt Disney World in Florida.

Disney’s international parks also benefited from new a Frozen attraction in Hong Kong and Zootopia in Shanghai.

The company’s traditional media businesses continued to struggle, hurt by an accelerating decline in its broadcast and cable TV — led by ABC — and continued losses at the division that includes the film studio. The movie division has registered quarterly losses for most of the past two years.

Revenue from content sales and licensing — including the film studio — fell 38% from a year earlier, while sales at Disney’s domestic TV networks slumped 14% last quarter, worsened by strikes that shut down production in Hollywood. 

On Tuesday, Disney announced plans to bundle ESPN content with programming from Fox Corp. and Warner Bros. Discovery Inc. to create a new sports-focused streaming service.

“The purpose of the venture is purely distribution. It’s not about procurement of content,” Disney Chief Financial Officer Hugh Johnston told Bloomberg TV on Thursday. “We all will be bidding independently, and that’s something that, that we’re quite firm on.”

Johnston added that the three members will “continue to compete with each other for sports rights, just as we always have,” and said “reduced friction” will benefit the leagues.”

Before that announcement, Trian’s plans for Disney included bundling ESPN’s streaming business with a larger player like Netflix Inc., Bloomberg reported. Trian dropped an effort to seek Disney board seats last year, but renewed its efforts before this year’s annual meeting. 

“We saw this movie last year and we didn’t like the ending,” Trian said in a statement.