Disney Profit Tops Estimates, Shares Rise Late

Walt Disney (DIS) shares jumped on Wednesday after the entertainment giant beat earnings estimates, floated the resumption of dividend payments by year’s end, and said it plans to cut 7,000 jobs to reduce costs.

Disney reported an adjusted fiscal first quarter profit of 99 cents per share, exceeding the 77 cents estimated by analysts surveyed by Visible Alpha. While profit fell 7% from a year earlier, revenue climbed 8%.

Walt Disney Earnings Results
Metric  Beat/Miss/Match Reported Value Analysts’ Prediction
Adjusted Earnings Per Share ($) Beat 0.99 0.77
Revenue ($ B) Beat 23.5 23.4

Source: Predictions based on analysts’ consensus from Visible Alpha

Disney’s theme parks posted a 21% revenue gain and the entirety of operating income, while the company’s media and entertainment distribution segment had direct-to-consumer losses of more than $1 billion primarily from the Disney+ streaming platform, which offset the earnings at ESPN, ABC and other television assets.

Key Takeaways

  • Walt Disney earnings and revenue topped estimates late Wednesday.
  • The entertainment giant earned 99 cents per share on an adjusted basis, down from $1.06 per share a year earlier.
  • Shares rose 6% late after CEO Bob Iger said he plans to announce the resumption of “modest” dividend payments by the end of the year; 7,000 jobs to be cut.
  • Theme parks powered the results, while television profit helped to offset losses at Disney+.
  • Disney’s cost-cutting campaign is targeting $2.5 billion in annual savings.

CEO Bob Iger, recently returned to the company’s top job after the abrupt firing of his predecessor Bob Chapek in November, said on the earnings conference call that he will ask the board to resume dividend payments suspended in the spring of 2020 by the end of the year, “now that the pandemic impacts to our business are largely behind us.”

The dividend will initially be “modest,” Iger, said, with funding for it to come from a cost-cutting campaign Disney is counting on to save it $2.5 billion annually. The company posted a free cash flow deficit of nearly $2.2 billion in the latest quarter.

Iger, 71, opted not to announce any restructuring initiatives beyond those he’s already launched. The CEO previously led Disney from 2005 to 2020, and his new two-year contract assumes he’ll help the company find a successor by late next year before stepping down.

“After a solid first quarter, we are embarking on a significant transformation,” Iger said in the earnings release. “The work we are doing to reshape our company around creativity, while reducing expenses, will lead to sustained growth and profitability for our streaming business, better position us to weather future disruption and global economic challenges, and deliver value for our shareholders.”

Iger is facing a proxy battle waged by activist shareholder Nelson Peltz, who is seeking to replace one of the company’s nominees on its board. Some analysts have speculated that the company may seek to spin off ESPN, which faces pressure from cable cord-cutting and escalating sports rights fees. The bulk of Disney’s weakness in its linear networks unit during the quarter came on declines overseas in assets it acquired as part of its 20th Century Fox acquisition in 2019.

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