Source-Bloomberg.com
Walt Disney Co., facing increasing pressure from activist investor Nelson Peltz, has reported higher-than-expected fourth-quarter profits and revealed plans to cut an additional $2 billion in expenses. The entertainment giant’s financial results come as it grapples with Peltz’s efforts to secure board seats for his investment fund, Trian Fund Management.
Strong Q4 Earnings and Revenue Growth
Disney announced that its fiscal fourth-quarter earnings reached 82 cents per share, excluding some exceptional items. This surpassed analysts’ expectations, which averaged 69 cents according to Bloomberg estimates. Moreover, the company’s revenue for the quarter increased by 5.4%, reaching $21.2 billion, although slightly falling short of the $21.4 billion projected by analysts.
Continued Cost Reduction and Dividend Resumption
In response to these results, Company CEO Bob Iger conveyed the company’s commitment to further cost-cutting measures, stating that these actions will usher Disney into “an era of building.” By the end of 2023, Disney intends to reinstate dividend payments, addressing a concern raised by Peltz. Peltz, whose Trian Fund Management holds a significant stake in Disney valued at approximately $2.5 billion, has been vocal about reducing the company’s expenses.
Iger had previously pledged to eliminate over $5.5 billion in annual expenses and has already cut 8,000 jobs earlier this year. Nevertheless, Disney stated that these newly announced budget cuts are not expected to lead to extensive job losses.
Diverse Earnings Sources and Streaming Progress
Disney’s flagship theme parks played a significant role in the impressive Q4 performance, with earnings rising by 31% to $1.76 billion. The company’s Consumer Products division also reported robust growth, with a 12% increase in revenue to $8.16 billion, fueled by 55% international growth.
In the digital realm, the Company’s streaming business, which includes ESPN+, narrowed its losses to $387 million, surpassing Wall Street expectations. The company remains optimistic about achieving profitability in the streaming sector by the end of the current fiscal year.
The number of Disney+ paying subscribers globally surged to more than 150.2 million, surpassing estimates of 147.4 million and returning to growth. Excluding Hotstar customers, Disney+ subscribers increased by 7%, reaching 112.6 million.
The company’s stock price responded positively to these results, surging over 3% in extended trading to $87.13. This rebound came after a challenging year, during which the stock had fallen by approximately 8%.
Future Direction and Activist Investor Pressure
Looking forward, Disney is expected to reduce its overall content spending to $25 billion in the current fiscal year, marking a 17% decrease compared to two years ago. The company is also considering selling some of its programming to Netflix, excluding core brands like Marvel and Star Wars.
Peltz has persistently argued that Disney’s costs are too high and has called for greater accountability in areas such as succession planning. He initially sought board representation but retracted his request after Iger introduced the initial round of cost-cutting measures.
In addition to cost-cutting, Iger is exploring options to reposition Disney as traditional TV networks such as ABC, National Geographic, and FX continue to face declining viewership and ad revenue. Iger has even suggested the possibility of selling these networks or seeking minority investors and tech company partnerships to accelerate the transition of ESPN into a streaming service.
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