A month has gone by since the last earnings report for Walt Disney (DIS). Shares have lost about 12.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Disney due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Disney Q3 Earnings Beat Estimates, Revenues Up Y/Y
The Walt Disney Company reported third-quarter fiscal 2023 adjusted earnings of $1.03 per share, beating the Zacks Consensus Estimate by 4.04% but declining 5.5% year over year.
Revenues increased 3.8% year over year to $22.33 billion but missed the consensus mark by 0.48%.
Segment Details
Media and Entertainment Distribution (62.7% of revenues) revenues decreased 0.8% year over year to $14 billion.
Revenues from Linear Networks declined 6.9% year over year to $6.69 billion. Direct-to-Consumer revenues increased 9.2% year over year to $5.53 billion. Content Sales/Licensing and Other revenues decreased 1.4% year over year to $2.08 billion.
Parks, Experiences and Products revenues (37.3% of revenues) increased 12.6% year over year to $8.33 billion. Domestic revenues were $5.65 billion, up 4.2% year over year. International revenues jumped 94.4% year over year to $1.53 billion in the reported quarter.
Meanwhile, revenues from Disney’s Consumer Products decreased 3.2% year over year to $1.15 billion.
Subscriber Details
ESPN+ had 25.2 million paid subscribers at the end of the fiscal third quarter compared with 25.3 million at the end of the previous quarter.
Disney+, as of Jul 1, 2023, had 146.1 million paid subscribers compared with 157.8 million as of Apr 1, 2023.
Meanwhile, Disney’s Hulu ended the quarter with 48.3 million paid subscribers, up from 48.2 million reported in the previous quarter.
The average monthly revenues per paid subscriber for ESPN+ decreased 3% year over year to $5.45.
The average monthly revenues per paid subscriber for Disney+ core came in at $6.58, up 2% year over year.
The average monthly revenues per paid subscriber for Disney’s Hulu SVOD-only service increased 6% year over year to $12.39.
The average monthly revenues per paid subscriber for Disney’s Hulu Live TV + SVOD service declined 1% from the year-ago quarter to $91.80.
Operating Details
Costs & expenses increased 3.2% year over year to $19.69 billion in the reported quarter.
Segmental operating income was $3.56 billion, down 0.2% year over year.
Media and Entertainment Distribution’s segmental operating income declined 17.9% year over year to $1.13 billion.
Linear Networks’ operating income decreased 23.5% to $1.89 billion.
Direct-to-Consumer operating loss was $512 million, narrower than the year-ago quarter’s loss of $1.06 billion.
Content Sales/Licensing and Other operating losses were $243 million compared with an operating loss of $27 million reported in the year-ago quarter.
Parks, Experiences and Products’ operating income was $2.43 billion, up 10.9% year over year.
The Domestic segment reported an operating income of $1.44 billion, down 13% year over year. The International segment reported an operating income of $428 million against an operating loss of $64 million reported in the year-ago quarter.
Consumer Products’ operating profit decreased 6.3% year over year to $561 million.
Balance Sheet
As of Jul 1, 2023, cash and cash equivalents were $11.46 billion compared with $10.4 billion as of Apr 1, 2023.
Total borrowings were $47.19 billion as of Jul 1, 2023 compared with $48.52 billion as of Apr 1, 2023.
Free cash flow was $1.64 billion in the reported quarter compared with free cash flow of $1.99 billion in the previous quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, Disney has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Disney has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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