Disney (DIS) on Wednesday announced a 50% increase in its cash dividend after reporting better-than-expected first-quarter results while streaming losses narrowed.
Disney reported adjusted earnings of $1.22 per share, well above the $0.99 expected by analysts surveyed by Bloomberg. The company also forecast full-year 2024 earnings of $4.60 per share, an increase of at least 20% from 2023.
Sales came in at $23.5 billion, slightly below expectations of $23.8 billion.
Disney is grappling with challenges including a decline in its linear television business, slowing growth in its parks business and losses in its streaming business. Last year, as stock prices hit multi-year lows, activist investor Nelson Peltz renewed his call for a shake-up of the company's board.
CEO Bob Iger is working on a variety of cost-cutting measures to combat these challenges. The company said Wednesday it is on track to meet or exceed its annual savings goal of $7.5 billion by the end of fiscal year 2024, adding that it “continues to explore further efficiency opportunities.”
The company announced a cash dividend of $0.45 per share, a 50% increase compared to the previous dividend paid in January. The dividend is scheduled to be paid on July 25 to shareholders of record as of the close of business on July 8.
The board also approved a new stock repurchase program with a target of $3 billion in acquisitions in fiscal year 2024.
In another surprising announcement, Disney said it plans to invest $1.5 billion in Fortnite maker Epic Games. Shares rose about 8% in after-hours trading.
Focus on streaming profitability
The entertainment division's streaming loss narrowed to $138 million from a $984 million loss in the same period last year, as the company raised streaming prices. However, the core number of Disney+ subscribers, excluding the Indian product Disney+ HotStar, decreased by 1.3 million quarter-on-quarter due to these increases.
The subscriber loss, in line with the company's guidance, was slightly higher than Wall Street expected, with a consensus estimate of a loss of about 700,000 Disney+ core users.
The company said it expects Disney+ to add 5.5 million to 6 million core users in the second quarter. He also expects average revenue per user (ARPU) to continue its positive momentum as Disney+'s core ARPU increased by $0.14 compared to Q4.
Total direct-to-consumer losses, including ESPN+, were $216 million, compared to $1.05 billion in the same period last year.
“We continue to expect our combined streaming business to reach profitability in the fourth quarter of fiscal 2024,” the company said. “We believe this business will ultimately become a significant revenue growth driver for the company.”
Due to the recent price hike, the company will also start cracking down on password sharing.
Shortly before announcing its earnings, Disney sent out a notice to Disney+ users warning that it would begin restricting account sharing starting in March. The announcement comes days after Hulu sent a similar notice to its subscribers.
Iger previously said the number of subscribers sharing accounts was “substantial,” but he first revealed the company's commitment to password sharing during its third-quarter earnings call in August.
As a reminder, Disney recently adjusted its reporting structure after CEO Bob Iger reorganized the company into three core business segments. Experiences including park business. Sports includes ESPN Networks and ESPN+.
Here's how each segment performed for the quarter compared to Wall Street consensus estimates compiled by Bloomberg.
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Entertainment income: $9.98 billion vs. expected $10.54 billion
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sports income: $4.84 billion vs. $4.62 billion expected
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Experience income: $9.13 billion versus Expected to be $9.03 billion
Segment-wide operating income was $3.88 billion, an increase of 27% year over year.
Entertainment's operating income reached $874 million, an increase of more than 100% year-over-year, and Experience's first-quarter revenue, operating profit and operating margin were all-time highs.
The Sports division's operating loss was $103 million, still an improvement of 37% compared to the $164 million loss in the year-ago period.
News broke Tuesday that Disney-owned ESPN is partnering with Warner Bros. Discovery (WBD) and Fox (FOXA) to launch a new sports streaming service, set to debut sometime this fall.
Note that this is separate from Disney's ESPN streaming ambitions. The company continues to seek strategic partners through joint ventures or partial ownership to help ESPN launch its flagship direct-to-consumer service within the next few years. Disney is reportedly in talks with the NFL regarding a potential stock acquisition.
On the other hand, linear networks continued to struggle. The segment's operating income fell 12% year over year to $2.8 billion, and the linear segment's operating income fell 7% to $1.2 billion.
alexandra canal I'm a senior reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, Email alexandra.canal@yahoofinance.com.
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