Disney's theme parks drag on third quarter results
By Josh White
Date: Wednesday 07 Aug 2024
(Sharecast News) - Walt Disney reported a mixed third-quarter performance on Wednesday, driven by significant growth in its streaming business, offset by challenges in its theme park operations.
The entertainment giant reported a revenue increase to $23.2bn, a 3.7% rise from the prior year, surpassing analyst expectations of $23.1bn.
Earnings per share, excluding certain items, jumped to $1.39, beating projections of $1.19.
One of the quarter's highlights was Disney's streaming division, which posted its first-ever profit, achieving $47m.
The milestone came one quarter ahead of schedule, fuelled by strong performances from Disney+, Hulu, and ESPN+.
It said the release of 'Inside Out 2', which became the highest-grossing animated film of all time, played a crucial role in that success, driving over 1.3 million new Disney+ sign-ups and surpassing 100 million views for its teaser trailer.
Conversely, Disney's theme park segment faced headwinds - despite a 2% increase in revenue, the division's operating income fell by 3%.
Factors contributing to the decline included rising operational costs, softening consumer demand, and specific challenges at Disneyland Paris, where summer travel was impacted by the Olympics.
The company also noted a cyclical softening in China.
Disney now anticipated a mid-single-digit decline in the parks segment's profit in the fourth quarter, adding that it was actively managing costs to mitigate the impact.
Disney's film studio also returned to profitability, reporting a $254m profit, marking an end to a series of losses.
The turnaround was largely attributed to the success of 'Inside Out 2'.
Disney also raised its earnings growth forecast for the full year to 30%, up from the previous 25%, signalling confidence in its ongoing recovery.
Looking ahead, Disney said it expected its streaming businesses to continue being profitable in the fourth quarter, with moderate subscriber growth for Disney+ Core.
However, the company cautioned that the theme park division could face ongoing challenges in the coming quarters.
"Our performance in the third quarter demonstrates the progress we've made against our four strategic priorities across our creative studios, streaming, sports, and experiences businesses," said chief executive Robert Iger.
"This was a strong quarter for Disney, driven by excellent results in our Entertainment segment both at the box office and in DTC, as we achieved profitability across our combined streaming businesses for the first time and a quarter ahead of our previous guidance.
"Despite softer third quarter performance in our experiences segment, adjusted earnings per share for the company was up 35%, and with our complementary and balanced portfolio of businesses, we are confident in our ability to continue driving earnings growth through our collection of unique and powerful assets."
In other developments, Disney disclosed in a securities filing that it might need to pay an additional $5bn to acquire Comcast's 33% stake in Hulu, as the two companies continued to arbitrate over Hulu's valuation.
The final decision on the arbitration was expected in the 2025 financial year.
At 1143 EDT (1643 BST), shares in the Walt Disney Company were down 1.64% in New York at $88.49.
Reporting by Josh White for Sharecast.com.
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