Walt
Disney
shares have been left out of this year’s rally, with the stock down 3% since the end of December.
The company has been hurt by the combined effects of weaker results at ESPN, softer growth in the streaming sector, and the continued erosion of linear TV viewing.
CEO Robert Iger is under pressure to make big moves. He has said that the company would consider the sale of non-core assets, which could include high-profile properties like ABC. And the company needs to reset the future of ESPN, potentially with outside financial partners.
Investors will get fresh data on the status of the turnaround when Disney (ticker: DIS) reports financial results for its fiscal fourth quarter after the close of trading on Wednesday. For the period ended in September, the Wall Street consensus, as tracked by FactSet, calls for Disney to post sales of $21.4 billion, up 6% from a year ago, with profits of 71 cents a share.
For the December quarter, Wall Street sees revenue of $24.2 billion, with profits of $1.15 a share.
Disney investors will get a first look this week at new Chief Financial Officer Hugh Johnston, who was named to the post on Monday. He replaces interim CFO Keivn Lansberry, who had been serving in the role since June following the departure of Christine McCarthy. Johnston joins Disney following a 34-year career at
PepsiCo
(PEP), where he had served most recently as CFO and vice chairman.
One wrinkle is that, effective this quarter, Disney has changed its reporting structure into three revamped segments—entertainment, sports, and experiences. Entertainment includes linear TV, streaming services, films, Broadway shows, and the like. Sports is mostly ESPN. Experiences include theme parks, cruise ships and hotels, as well as consumer products.
MoffettNathanson analyst Michael Nathanson projects fourth-quarter entertainment revenue of $9.6 billion, up 3% from a year ago, with sports about flat at $3.9 billion and experiences up 7% to $7.8 billion.
For fiscal 2024, Nathanson sees overall growth of 4%, including 6% growth in experiences, and 3% growth in each of the other two units. Nathanson has a price target of $115 for Disney stock, some 35% above Tuesday’s close of $84.59.
In reporting June quarter results, Disney said it was expecting growth in net subscribers for its Disney+ streaming service. The Wall Street consensus calls for Disney+ subscribers to grow by about four million in the quarter to 109.5 million.
Disney has also previously said that ad revenue was likely to benefit in the September quarter thanks to higher demand at Hulu, as well as the ramp of an ad-supported Disney+ subscription tier.
Disney has reiterated its forecast for high single-digit growth in revenue and operating income for the year, excluding the impact from the shutdown of Galactic Starcruisers, it’s now-closed Star Wars-themed hotel in Orlando.
In a research note this week, Lightshed Partners analyst Richard Greenfield outlined a dozen strategic questions for Disney heading into the quarter. Some of those are focused on the future of ESPN—and the company’s stated plan to launch a direct-to-consumer version of the channel given the shrinking base of cable TV subscribers. The core issue for ESPN, Greenfield wrote, is that the cost of sports rights is rising faster than the related revenue.
Greenfield is also looking for some more information about Disney’s planned acquisition of
Comcast’s
(CMCSA) one third stake in Hulu. He wonders whether Disney will remain committed to Hulu + Live TV, the company’s internet-based cable replacement services which competes with Sling and YouTube TV.
Write to Eric J. Savitz at [email protected]
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