Proactive Investors - Walt Disney Co (NYSE:DIS, ETR:WDP) shares fell 10% despite a hike being made to the full-year earnings outlook after quarterly results mostly came in higher Wall Street forecasts.
Its entertainment streaming businesses, Disney+ and Hulu, turned a first profit and there was a strong performance from Disney World, which helped the House of Mouse's increase revenues to $22.08 billion in its second quarter from $21.8 billion a year earlier. This was roughly in line with analyst expectations.
Pre-tax income tumbled 69% to $657 million due to goodwill impairments of $2,052 million to its Star India and entertainment networks.
Underlying profits were positive, with segment operating income up 17% to $3.85 billion and adjusted earnings per share of $1.21 beating the Street's $1.10 average estimate.
Guidance for full-year adjusted earnings growth was raised to 25%, up from 20% before.
The Disney+ streaming service was boosted by a six million increase in subscribers and an increase in average revenue per user, meaning the direct-to-consumer (D2C) entertainment streaming business broke into a maiden profit of $47 million. When including ESPN+ sports, the combined streaming arm made a loss, though it was much smaller than a year ago.
CEO Bob Iger said the rise in adjusted EPS of 30% compared to the prior year "demonstrates we are delivering on our strategic priorities and building for the future".
He acknowledged that gains for streaming, Disney World resort and Disney cruises, was partly offset by lower results at the Disneyland resort.
Overall, he said Disney remains "on track" to achieve profitability in the combined streaming businesses in the fourth quarter of the year.
"Looking at our company as a whole, it’s clear that the turnaround and growth initiatives we set in motion last year have continued to yield positive results," he said, hailing cinematic releases coming in the next few months, television shows "resonating" and "turbocharging" growth in Experiences with strategic investments.
Original show 'Shogun' has been highly rated and well watched in the past quarter, but data from Nielsen shows the Australian animated kids series 'Bluey', not a Disney original, has been the most watched show on US streaming networks in 2024 so far.
The shares fell as expectations had been high, said XTB market analyst Kathleen Brooks.
While Iger won the boardroom battle with Nelson Peltz, she said higher guidance for earnings per share was enough to stop the market selling Disney on the back of these results: "Expectations for Disney’s earnings were high, as the share price has risen by nearly 30% in the year to date.
"With a decent rally coming into these results, nothing less than perfection was acceptable to the market, as Iger and co. found out."