Disney’s latest financial results demonstrate a notable recovery and strategic progress across its diverse business segments. For the third quarter ending June 29, 2024, The Walt Disney Co. achieved a remarkable turnaround, reporting a net income of $2.62 billion, or $1.43 per share. This is a significant improvement compared to the same quarter last year, when the company reported a loss of $460 million, or 25 cents per share. When excluding one-time gains, Disney’s earnings per share stood at $1.39, comfortably exceeding the $1.20 per share forecasted by analysts surveyed by Zacks Investment Research.
Revenue for Disney in this quarter rose by 4% to $23.16 billion, surpassing Wall Street’s forecast of $22.91 billion. This growth was largely driven by robust performances across its content sales and licensing segment. Notably, Disney’s content sales segment contributed $254 million in operating income, boosted by the phenomenal success of “Inside Out 2.” The sequel has become the highest-grossing animated film of all time, helping to significantly enhance Disney’s revenue from content sales. The film’s success also had a positive ripple effect on Disney+, with the original “Inside Out” generating over 1.3 million new sign-ups for the streaming service and the sequel’s teaser trailer amassing over 100 million views worldwide.
A major highlight of Disney’s quarter was the profitability achieved by its direct-to-consumer segment, which includes Disney+, Hulu, and ESPN+. This segment reported an operating loss of $19 million, a dramatic improvement from the $505 million loss recorded a year earlier. Revenue for the direct-to-consumer segment climbed by 15% to $5.81 billion, showcasing strong growth and a more efficient operational model. The profitability in this sector was unexpected, as Disney had initially projected that its streaming business might face difficulties in the third quarter, particularly due to challenges with Disney+Hotstar in India. However, the unexpected profitability of its combined streaming services was a welcome surprise, as Disney had initially anticipated achieving this milestone in the fourth quarter.
In the Experiences division, which encompasses Disney’s theme parks and resorts, revenue increased by 3% during the quarter. International parks saw a 5% rise in revenue, while domestic parks experienced a 6% decline in operating income. The decline in domestic parks was attributed to higher costs associated with inflation, technology investments, and new guest offerings. Disney has noted that the moderation in demand for domestic parks might continue into the upcoming quarters. This anticipated moderation is attributed to cyclical softening in markets like China, the impact of the Olympics on Disneyland Paris, and broader economic factors affecting consumer travel and spending. For the fourth quarter, Disney expects operating income in its Experiences segment to decrease by mid-single digits compared to the previous year.
Looking forward, Disney is optimistic about its financial prospects, forecasting a 30% increase in adjusted earnings per share for the full year. This outlook reflects the company’s confidence in its strategic initiatives and market position. Additionally, Disney has successfully resolved previous conflicts, such as the legal dispute with Florida Governor Ron DeSantis. In June, Disney and the state reached a settlement that included a $17 billion investment in Disney World over the next 20 years and commitments for infrastructure improvements, resolving the last piece of contention between the parties.
Despite these positive developments, Disney’s stock experienced a slight dip before the market opened on Wednesday. This minor decline underscores the volatile nature of the stock market and investor sentiment, even in the face of strong financial performance. Nonetheless, Disney’s impressive quarterly results, strategic advancements, and successful resolution of conflicts are likely to strengthen its position and confidence among investors as it continues to navigate its business operations and market challenges for the rest of the year.