Disney Surpasses Earnings Expectations, Boosted by Theme Parks and Streaming

In a recent development that has left investors and market analysts pleasantly surprised, Walt Disney (DIS.N) has surpassed Wall Street's Q4 earnings predictions. This success is largely attributed to increased footfall at its theme parks in Shanghai and Hong Kong, which successfully compensated for a dip in advertising revenue from the television network ABC. The company's shares rose by 3% in after-hours trading, reflecting investor's faith in CEO Bob Iger's strategic cost-cutting measures and the impressive growth in streaming subscribers. To add to the good news, Disney also plans to propose the reinstatement of dividend payments to its shareholders by the end of 2023, according to interim CFO Kevin Lansberry.

For the fiscal fourth quarter that ended on September 30, Disney reported an adjusted per-share earning of 82 cents, surpassing the average forecast of 70 cents according to LSEG data. The quarterly revenue stood at $21.2 billion, aligning with consensus estimates. The entertainment giant also added nearly 7 million Disney+ streaming subscribers during the quarter, with popular content such as "Guardians of the Galaxy Vol. 3" and the original series "Star Wars: Ahsoka" driving the growth.

Disney+ and Disney+ Hotstar now boast a combined total of 150.2 million subscribers, outpacing Visible Alpha's estimate of 147.4 million. "Our results this quarter reflect the significant progress we've made over the past year," Iger stated. "While we still have work to do, these efforts have allowed us to move beyond this period of fixing and begin building our businesses again."

In line with this, Disney is now aiming for $7.5 billion in annualized savings through aggressive cost management. The company is once again facing pressure from activist shareholder Nelson Peltz whose Trian Fund Management is expected to seek board seats. Despite this pressure, Disney remains focused on efficiencies and content, setting it apart from traditional rivals in the streaming world.

Disney's streaming services, including Hulu and ESPN+, reported a narrowed quarterly loss of $387 million, a significant improvement from $1.47 billion a year earlier. This is due to pricing increases and higher ad revenue. Disney's streaming business is expected to reach profitability by September 2024.

Disney's newly named Experiences group, which includes its theme parks and resorts, cruise lines and consumer products, reported nearly $1.8 billion in operating income in the quarter, up 31% from a year ago. Higher attendance at Shanghai Disney, Hong Kong Disneyland and Disneyland resorts, and growth of the cruise businesses, helped offset lower results at Walt Disney World in Florida.

Disney's Entertainment unit, which includes its television networks, film studio and its Disney+ and Hulu services, posted operating income of $236 million in the quarter, compared with losses of $608 million a year ago. However, ABC network and Disney's owned TV stations reported a drop in advertising revenue amid declining viewership.

Disney's sports business, which includes Disney's ESPN-branded television channels, its ESPN+ streaming service and the Star-branded sports channels in India, reported operating income of $981 million, up 14% from the same period a year ago. The results reflected lower programming costs, as ESPN walked away from renewing its contract with the Big Ten college football conference. The unit was also helped by a rise in subscription revenue from ESPN+, as the result of a price increase and subscriber gains.

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