Disney stock gains as streaming growth overtakes earnings and revenue miss

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The Walt Disney Co. disappointed Wall Street with earnings and revenue results Wednesday, but added more streaming subscribers than expected in the wake of problems at rival Netflix Inc., sending shares higher in late trading.

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Disney DIS,
-2.29%
posted fiscal second-quarter net income of $470 million, or 26 cents a share, on sales of $19.25 billion, up from $16.25 billion a year ago. Revenue took a $1 billion hit due to Disney paying a penalty for canceling a contract with a partner, due to content that the company decided to air on its own streaming service instead, causing the revenue miss.

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After adjusting for restructuring costs, amortization and other effects, the company reported earnings of $1.08 a share, compared with adjusted earnings of 32 cents a share a year ago. Analysts surveyed by FactSet had expected adjusted earnings of $1.19 a share on revenue of $20.05 billion.

The results sent Disney’s stock up almost 5% in after-hours trading Wednesday following the release of the results, after falling 2.3% to $105.25 in the regular session.

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“Our strong results in the second quarter, including fantastic performance at our domestic parks and continued growth of our streaming services — with 7.9 million Disney+ subscribers added in the quarter and total subscriptions across all our DTC offerings exceeding 205 million — once again proved that we are in a league of our own,” Disney Chief Executive Bob Chapek said in a statement announcing the results.

Disney+ reached 137.7 million subscribers, an addition of 7.9 million from the previous quarter, and Disney reported more than 205 million total streaming subscribers to services that also include ESPN+ and Hulu. Analysts on average expected 135.07 million Disney+ subscribers and 204.4 million total streaming customers, according to FactSet.

Disney’s performance in streaming comes amid escalating competition from rivals Netflix NFLX,
-6.35%,
Apple Inc. AAPL,
-5.18%,
Warner Bros. Discovery Inc. WBD,
-4.21%,
Comcast Corp. CMCSA,
-1.14%
and Amazon.com Inc. AMZN,
-3.20%
at the time when belt-tightening consumers are scaling back on subscriptions. Netflix has been especially pinched, losing subscribers for the first time in a decade, because of a variety of reasons that include inflation, the war in Ukraine and competition.

In a sign of its struggles, Netflix is ​​expected to unfurl an ad-supported, lower-priced subscription tier by the end of the year, according to a New York Times report, In discussing the decision in a taped interview last month, co-CEO Reed Hastings noted that Hulu’s success with ad-supported streaming helped solidify the decision.

“It’s pretty clear that it’s working for Hulu, Disney’s doing it, HBO did it. I don’t think we have a lot of doubt that it works,” he said.

Disney’s largest business segment, “Media and Entertainment Distribution,” racked up sales of $13.62 billion in the quarter, up from $12.44 billion a year ago; analysts on average predicted $13.7 billion. Direct-to-consumer sales, which includes streaming services as well as some international products, hauled in $4.9 billion, slightly short of analysts’ forecast of $5.06 billion on average.

Disney’s television networks generated sales of $7.12 billion, while analysts’ average estimates called for $6.8 billion. Content sales and licensing, a category that includes Disney’s film business, registered revenue of $1.87 billion vs. expectations of $2.07 billion.

The company’s iconic theme parks and product sales business increased to $6.65 billion in revenue from $3.17 billion a year ago. The average analyst estimate was $6.3 billion.

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Credit: www.marketwatch.com /

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