Entertainment behemoth Disney fell Tuesday following its second-quarter results after reporting improved streaming financials and updating its earnings guidance.
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Disney Earnings
Disney (DIS) reported a 30% increase in adjusted earnings, to $1.21 per share — marking a second straight quarter of slowing growth. Revenue rose 1% to $22.08 billion.
The results cleared FactSet earnings expectations of $1.10 per share, but fell just short of the revenue forecast of $22.12 billion.
Disney+ subscribership increased to 153.6 million for the quarter, up from 149.6 million in Q1 but down from 157.8 million last year. FactSet expected 154.5 million subscribers for the quarter. The company added about 6 million Disney+ Core subscribers to 117.6 million, which includes Hotstar in India.
Hulu subscribership rose 1% to 50.2 million.
Entertainment streaming revenue jumped 13% to $5.64 billion, driven by an increase in subscribers and average monthly subscription price. Disney's direct-to-consumer entertainment business reported operating income of $47 million for the quarter, compared to a loss of $587 million last year.
Combined direct-to-consumer revenue for Disney's entertainment and sports segments jumped 12% to $6.12 billion. Combined direct-to-consumer operating losses narrowed to $18 million from $659 million last year. Sports streaming, including ESPN+, had an operating loss of $65 million.
Total parks and experiences revenue rose 10% to $8.39 billion. Theme park revenue rose 10.7% to $7.48 billion, beating FactSet views of $7.3 billion.
Sports revenue rose 2% to $4.3 billion.
Disney raised its full-year adjusted earnings outlook to 25% growth. The company previously expected 20% growth, MarketWatch reported.
Sports And Streaming Deal Discussions
Meanwhile, grocery chain Kroger (KR) is in discussions to offer Disney+ to paying members of its Kroger Boost delivery program, Bloomberg reported on May 1. If the deal goes through, Kroger Boost members would have access to Disney's streaming service this year at no additional cost.
Elsewhere, Disney is expected to pay an average annual fee of $2.6 billion to renew its deal with the NBA, up from its current fee of $1.5 billion, the Wall Street Journal reported at the end of April. And Comcast (CMCSA)-owned NBCUniversal is working on a $2.5 billion bid to win the rights from Warner Bros. Discovery (WBD) and TNT.
Warner Bros. failed to reach a new agreement before its exclusive negotiating window expired in late April, which allowed NBC to make a bid, according to the WSJ.
But Disney and the new TV partner will air fewer basketball games under the new agreements afterAmazon (AMZN) Prime secured a major streaming deal on April 26, The Athletic reported.
Amazon's deal begins with the 2025-2026 season and is expected to last at least 10 years. The Prime Video streaming service will include regular season and postseason games, with the possibility of conference finals in the future. Financial terms of the deal were not disclosed.
Elsewhere, ESPN, FOX and Warner Bros. on Feb. 6 announced a joint venture to develop and launch a new sports streaming service in the U.S. this fall. The new product will combine content from Disney-owned ESPN, along with TNT and Fox Sports and feature the major U.S. sports leagues, many top college divisions, as well as The Masters, FIFA World Cup, Wimbledon, Formula 1 and more.
Feuds Settled
Disney at the beginning of April won its "distracting" proxy board battle against Trian Fund Management and Blackwells Capital during its annual shareholder meeting. Nelson Peltz's Trian firm and Blackwells had campaigned for influence over the board.
Trian sought to place Peltz on the board, along with former Disney CFO Jay Rasulo. The firm had a target of reaching margins of 15% to 20% by 2027. Blackwells angled to place three of its nominees on the board. The firm also floated the idea of potentially spinning out Disney into three separate, public entities.
Elsewhere, Disney and Florida Gov. Ron DeSantis on April 3 reached a settlement agreement regarding the Central Florida Tourism Oversight District, which runs the special tax district where Walt Disney World is located.
The disagreement started over Florida's 2022 Parental Rights in Education Act, which restricted discussions in classrooms of sexual orientation and gender identity.
Under the settlement, the Central Florida Tourism Oversight District agreed to work with Disney to update the 2020 comprehensive plan. The settlement also included two new DeSantis appointees to the district board. Disney executives indicated they can work with the current structure, NPR reported.
The agreement opens the door for additional theme-park development in Florida. Disney plans to invest $17 billion in Florida over the next decade. The investment is part of a $30 billion spending plan to upgrade its theme parks.
Disney Stock Performance
DIS stock dropped 8.6% Tuesday, dropping back below the 50-day moving average.
Shares swung 2.5% higher to 116.47 on Monday to push back above the line.
The stock trading tightly in the bottom half of a five-week flat base with a 123.74 buy point, according to MarketSurge charts.
Disney stock led the Dow Jones industrial average through Monday with a 29% gain. Shares are now up 16.7% after the Tuesday results. American Express (AXP) now ranks first in the Dow with a 25.2% advance.
You can follow Harrison Miller for more stock news and updates on X/Twitter@IBD_Harrison
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