It has been about a month since the last earnings report for Walt Disney (DIS). Shares have added about 6.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Disney due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Disney Q4 Earnings Miss Estimates, Revenues Rise Y/Y
Disney reported fourth-quarter fiscal 2022 adjusted earnings of 30 cents per share, missing the Zacks Consensus Estimate by 40% and declining 18.9% year over year.
Revenues increased 8.7% year over year to $20.15 billion but lagged the consensus mark by 4.50%.
Segment Details
Media and Entertainment Distribution (63.2% of revenues) revenues decreased 2.7% year over year to $12.73 billion.
Revenues from Linear Networks declined 5.4% year over year to $6.34 billion.
Direct-to-Consumer revenues increased 7.6% year over year to $4.91 billion.
Content Sales/Licensing and Other revenues declined 15.2% year over year to $1.74 billion.
Parks, Experiences and Products revenues (36.8% of revenues) increased 36.2% year over year to $7.43 billion. Domestic revenues were $5.01 billion, up 44.3% in the year-ago quarter. International revenues jumped 55% year over year to $1.07 billion in the reported quarter.
Disney’s nearest peer, Comcast, reported strong third-quarter 2022 results in its Theme Park business.
Comcast’s Theme Parks revenues jumped 42.4% year over year to $2.1 billion, reflecting higher attendance and increases in guest spending at its parks in the United States and Japan, as well as the Universal Beijing Resort.
Meanwhile, revenues from Disney’s Consumer Products increased 4.4% year over year to $1.34 billion.
Subscriber Details: Disney+
ESPN+ had 22.8 million paid subscribers at the end of the fiscal fourth quarter compared with 14.9 million at the end of the year-ago quarter.
Disney+, as of Oct 1, 2022, had 164.2 million paid subscribers compared with 118.1 million as of Oct 2, 2021.
The rapidly growing subscriber base strengthens Disney’s position in the increasingly saturated streaming space currently dominated by Netflix and the growing prominence of services from Apple, Peacock, Amazon prime video and HBO Max.
Netflix added 2.41 million paid subscribers globally in third-quarter 2022, higher than its estimate of gaining one million users.
Apple’s streaming service, Apple TV+, continues to gain recognition with its critically acclaimed and popular shows like Ted Lasso.
Meanwhile, Disney’s Hulu ended the quarter with 47.2 million paid subscribers, up from 43.8 million reported in the year-ago quarter.
The average monthly revenue per paid subscriber for ESPN+ increased 2% year over year to $4.84.
The average monthly revenue per paid subscriber for Disney+ was $3.91, down 5% year over year.
The average monthly revenue per paid subscriber for Disney’s Hulu SVOD-only service declined 4% year over year to $12.23.
The average monthly revenue per paid subscriber for Disney’s Hulu Live TV + SVOD service rose 2% from the year-ago quarter to $86.77.
Operating Details
Costs & expenses increased 9.3% year over year to $19.61 billion in the reported quarter.
Segmental operating income was $1.60 billion, which inched up 0.6% year over year.
Media and Entertainment Distribution’s segmental operating income declined 91.2% year over year to $83 million.
Linear Networks’ operating income increased 5.7% to $1.74 billion.
Direct-to-Consumer operating loss was $1.47 billion, wider than the year-ago quarter’s loss of $630 million.
Content Sales/Licensing and Other operating losses were $178 million compared with an operating loss of $65 million reported in the year-ago quarter.
Parks, Experiences and Products’ operating income was $1.51 billion compared with the year-ago quarter’s operating income of $640 million.
The Domestic segment reported an operating income of $741 million compared with the $244 million reported in the year-ago quarter.
The International segment reported an operating income of $74 million against an operating loss of $222 million reported in the year-ago quarter.
Consumer Products’ operating profit increased 13.1% year over year to $699 million.
Balance Sheet
As of Oct 1, 2022, cash and cash equivalents were $11.62 billion compared with $12.96 billion as of Jul 2, 2022.
Total borrowings were $48.37 billion as of Oct 1, 2022 compared with $46.6 billion as of Jul 2, 2022.
Free cash flow was $1.38 billion in the reported quarter compared with free cash flow of $1.92 billion in the previous quarter
Outlook
For the first quarter of fiscal 2023, Disney expects direct-to-consumer operating results to improve by at least $200 million sequentially.
Disney expects ESPN+ and Hulu to continue adding new subscribers in the current quarter. The company expects core Disney+ subscribers to increase only slightly in the quarter, reflecting tougher comparisons sequentially. Disney+ core subscriber growth is expected to increase in the fiscal second quarter, largely driven by international markets.
For fiscal 2023, Disney expects capital expenditures to be $6.7 billion compared with fiscal 2022 capital expenditure of $5 billion.
Disney expects cash content spending to be in the low $30 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -20.97% due to these changes.
VGM Scores
Currently, Disney has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Disney has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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