Walt Disney shares fall despite signs Iger’s turnaround measures are working
Walt Disney shares tumbled after the world’s biggest entertainment company reported that subscribers for its Disney+ streaming service were lower than analysts had expected, and a profit outlook for the year also came up short. The stock slid 6pc in early trading yesterday.
Disney raised its guidance for fullyear earnings growth to 25pc from 20pc, though analysts were looking for an increase of 25.5pc. Disney+ subscribers totalled 153.6 million in the three months ended March 30, less than the 155.66 million Wall Street was looking for.
The misses overshadowed what was otherwise a strong second-quarter report. Earnings rose to $1.21 (€1.12) a share, excluding some items, in the period ended March 30, surpassing the $1.12 average of analysts’ estimates. Revenue in that period increased 1.2pc to $22.08bn, compared with analysts’ forecast for $22.1bn.
While the shares tanked on the report, the profit results marked the fourth straight quarter that Disney has beaten expectations, in a sign that a turnaround is gaining momentum under CEO Bob Iger. Those gains helped Mr Iger vanquish activist investor Nelson Peltz, who unsuccessfully campaigned for a board seat at Disney’s annual meeting in April.
Profit climbed 12pc at the Disney division that includes parks, while losses from streaming shrank to $18m from $659m a year earlier.
Disney shares were up 29pc this year through to Monday, with Mr Iger unveiling initiatives such as a $1.5bn investment in Fortnite developer Epic Games, steep cost cuts, and the restoration of dividend payments.
The entertainment part of the company’s direct-to-consumer unit, which includes Disney+ and Hulu but not ESPN+, reported a profit of $47m, as sales growth outpaced higher costs for programming and marketing.
“Soft guidance for entertainment streaming next quarter might tamp enthusiasm,” on the stock, said Steve Severinghaus, an analyst at Emarketer, in a note to investors. “In all, though, today’s news strengthens Iger’s argument that Disney is in the middle of a long-awaited turnaround.”
Earnings in Disney’s theme-park division rose to $2.29bn in the second quarter, driven by sharply higher results internationally, especially Hong Kong. Domestically the company’s cruise line and Disney World resort in Florida registered income growth, while California’s Disneyland saw weaker performance due to higher costs.
Disney had no new theatrical releases in the quarter, partly due to the twin strikes by writers and actors last year. Mr Iger is seeking to reinvigorate that business by delaying some films to focus on quality. The unit that includes the movie studio reported a loss of $18m in the quarter on a 40pc decline in sales.