May 18, 2024

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Disney posts surprise streaming profits and raises earnings forecasts

Disney posts surprise streaming profits and raises earnings forecasts

Written by Lisa Richwine

LOS ANGELES (Reuters) – Walt Disney’s streaming entertainment unit reported its first earnings on Tuesday, two quarters ahead of schedule, and the media company raised its annual earnings per share forecast, as it said its turnaround efforts were paying off.

The company’s shares fell 1.4% in pre-market trading.

Disney said it now expects adjusted earnings per share to rise 25% this fiscal year, compared to the 20% it previously expected. It attributed this change to strong results in its theme parks and improvements in its streaming business.

Its direct-to-consumer entertainment division — which includes streaming services Disney+ and Hulu — reported operating income of $47 million from January through March.

Disney had promised Wall Street that the streaming operation would become profitable by September. The division has been losing money since Disney+ debuted in 2019 in a major move for the company to compete with Netflix.

“Our strong performance last quarter demonstrates that we have turned a corner and entered a new era for our company,” CEO Bob Iger, who defeated board challenges from activist investors last month, said in a statement.

“The steps we are taking today make way for Disney to become a preeminent creator of global content,” Iger added.

Like other media companies, Disney is trying to adapt to consumers’ migration from cable TV to streaming entertainment.

Iger, who came out of retirement to revamp Disney in November 2022, has laid out cost cuts that are expected to reach at least $7.5 billion by the end of September. He also unveiled a 10-year, $60 billion investment in theme parks and announced plans to create an ESPN live streaming app, among other efforts.

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Early-than-expected profit from entertainment streaming was driven by strict cost management, Chief Financial Officer Hugh Johnston said in an interview. A year ago, the streaming unit lost $587 million.

Disney+ added more than 6 million customers during the quarter, and average revenue per user rose 44 cents, outside India. Disney offers a lower price plan in India that is charged separately.

Due to the costs of streaming cricket, streaming entertainment is likely to post a loss in the current quarter but return to profit in the next period, Johnston said.

Disney also reports results for its combined streaming unit, including ESPN+. The combined unit should post financial profits in the fourth quarter and become “an important driver of future growth for the company, with further improvements in profitability for fiscal 2025,” Disney said in its earnings statement.

From January to March, its streaming business with ESPN+ lost $18 million.

During that period, Mouse House posted diluted earnings per share, excluding certain items, of $1.21, ahead of analysts’ consensus estimates of $1.10, according to LSEG data. Quarterly revenues rose to $22.1 billion, in line with analysts’ expectations.

The company’s Experiences division, which includes Disney theme parks around the world, reported operating income of $2.3 billion, an increase of 12% from the previous year.

In Disney’s entertainment segment, home to its traditional TV, streaming and movie businesses, operating income rose 72% from a year earlier to $781 million.

The sports unit that includes ESPN saw operating income decline 2% to $778 million, which it attributed to the timing of college football games.

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(Reporting by Lisa Richwine in Los Angeles; Additional reporting by Aditya Soni in Bengaluru and Don Chmielewski in Los Angeles; Editing by Peter Henderson, Matthew Lewis and Christopher Cushing)