Walt Disney Co. (NYSE:DIS) experienced a surge in shares, marking the highest increase in a year, following the announcement of better-than-expected profits and plans to cut an additional $2 billion in expenses.
In the fiscal fourth quarter, earnings reached 82 cents per share, excluding certain items, surpassing the anticipated 69 cents projected by analysts. Revenue closely aligned with expectations. Disney’s Chief Executive Officer, Bob Iger, highlighted the shift from “an era of fixing to a new era of building” as the company unveiled its plans for further cost-cutting.
Acknowledging concerns raised by activist investor Nelson Peltz, Disney plans to resume dividend payments by the end of 2023. Peltz, seeking board representation for his Trian Fund Management, which controls a $2.5 billion stake in Disney, has been advocating for expense control and the reinstatement of dividends.
The shares experienced a significant upswing, reaching as much as 7.4% to $90.71 in New York, marking the most substantial intraday advance since November 21, 2022. The additional budget cuts announced are not expected to result in widespread job losses.
In Disney’s fourth quarter, the flagship theme parks contributed significantly to profit, with a 31% increase to $1.76 billion. The streaming business, including ESPN+, narrowed losses to $387 million, performing better than Wall Street projections. The company remains optimistic about turning the streaming business profitable in the current fiscal year.
Disney+ global paying subscribers surpassed 150.2 million, exceeding estimates and returning to growth. The overall content spending is expected to decrease to $25 billion this fiscal year, representing a 17% decline from two years ago. Disney is also in talks to sell some of its programming to Netflix, excluding core brands like Marvel and Star Wars.
Bob Iger’s strategies include evaluating the repositioning of Disney as traditional TV networks, including ABC, National Geographic, and FX, face challenges in viewer and advertiser retention. The possibility of selling these networks or seeking a minority investor or joint venture with a tech company is being considered.
Iger hinted that the main ESPN channel would be offered as a standalone streaming product by 2025. Management broke out ESPN’s results separately for the first time, with revenue at its sports networks remaining stable at $3.91 billion, while earnings grew 14% to $981 million.
Disney is also acquiring Comcast Corp.’s one-third stake in the Hulu streaming service for at least $8.61 billion. The company plans to integrate Disney+ with Hulu in a single app, with a beta version set to debut next month and a formal rollout in March.
In the realm of leadership changes, Disney announced PepsiCo Inc.’s CFO, Hugh Johnston, as its new CFO. Johnston, a seasoned finance and operations executive, played a pivotal role in leading Pepsi through a previous Peltz campaign in the 2010s.
Featured Image: Unsplash