Bill Cara

Disney’s Q1 FY2024 Earnings Report is a Tale of Resilience and Growth

February 8, 2024

Walt Disney Company (DIS) reported its Q1 FY2024 earnings for Dec.31, 2023. CEO Robert A. Iger is optimistic about the company’s future, citing a renewed strength across all business segments and a solid foundation for growth.

These are the key points:

Financial Results:

  • Revenues for the quarter were $23.5 billion, comparable to the prior year.
  • Diluted earnings per share (EPS) increased to $1.04 from $0.70 in the previous year.
  • Excluding certain items, diluted EPS increased to $1.22 from $0.99 in the prior-year quarter.

Key Highlights:

  • The company is progressing in its strategic transformation, achieving over $500 million in cost reductions across businesses in the first quarter.
  • They are on track to meet or exceed the $7.5 billion annualized savings target by the end of fiscal 2024.
  • Full-year fiscal 2024 earnings per share, excluding certain items, are expected to increase by at least 20% versus 2023, reaching approximately $4.60.
  • Anticipates free cash flow generation of approximately $8 billion in fiscal 2024.

Streaming and Subscriber Information:

  • Expects profitability in combined streaming businesses in Q4 2024, with significant progress seen in Entertainment DTC operating losses.
  • Hulu subscribers increased by 1.2 million, while Disney+ Core subscribers decreased by 1.3 million, in line with guidance.
  • Expects Disney+ Core subscriber net additions of 5.5 to 6 million in the second quarter.

Business Segment Performance:

  • ESPN’s domestic business showed year-over-year growth in revenue and operating income in the first quarter.
  • Experiences segment generated all-time revenue, operating income, and operating margin records.
  • Approved a new share repurchase program targeting $3 billion in repurchases in fiscal 2024.
  • Increased cash dividend to $0.45 per share, payable on July 25, 2024 – a 50% increase from the last dividend.

Message from CEO:

  • Iger highlighted the strong performance, indicating a turning point for the company.
  • Emphasized a focus on fortifying ESPN, building streaming as a profitable growth business, reinvigorating film studios, and turbocharging growth in parks and experiences.
  • Expressed confidence in significant growth and success, anticipating increased shareholder returns.

Summarized Financial Results (Q1 2024 vs. Q1 2023):

  • Revenues: $23,549 million vs. $23,512 million (no change).
  • Income before income taxes: $2,871 million vs. $1,773 million (62% increase).
  • Diluted EPS: $1.04 vs. $0.70 (49% increase).
  • Diluted EPS excluding certain items: $1.22 vs. $0.99 (23% increase).
  • Cash provided by operations: $2,185 million vs. ($974 million) (not meaningful).
  • Free cash flow: $886 million vs. ($2,155 million) (not meaningful).

Summarized Segment Financial Results (Q1 2024 vs. Q1 2023):

  • Entertainment segment revenue decreased by 7%.
  • Sports segment revenue increased by 4%.
  • Experiences segment revenue increased by 7%.
  • Total segment operating income increased by 27%.

Maverick Comments:

This is the second consecutive quarter where Disney reported surprisingly impressive results, which the stock price has fairly reflected. As we move forward, it will be interesting to see how the company continues to navigate the evolving entertainment market landscape and leverage its strategic initiatives for sustained growth.

In the meantime, I increased the number of Maverick portfolios I find DIS suitable for. I also believe there is more upside to DIS before the current broad market Bull tops out.