Disney is back. After several quarters of cost-cutting and revamping its streaming business, CEO Robert Iger's turnaround plans are starting to pay off: On Thursday, the entertainment giant reported strong quarterly earnings and a strong outlook for next year. Total revenue in the fiscal fourth quarter was $22.57 billion, topping the $22.45 billion that analysts had expected, according to estimates compiled by LSEG. Adjusted earnings per share (EPS) jumped 39% year over year to $1.14, beating the estimate of $1.10, LSEG data showed. Disney shares jumped 10% after the results. Bottom line: It was a great quarter. Sales and profits won. The company achieved strong cash flows. Perhaps more importantly for investors, the direct-to-consumer unit's profitability was well above the consensus estimate. The good performance should continue, with management expecting earnings growth to accelerate over the next two years. The team rarely looks this far in its reporting. Helping achieve this result is all the work the team has done to create additional ways to make money from its content. As Iger noted on the earnings conference call, “a successful Disney movie today creates more value than in the past,” with an increased number of consumer touchpoints including streaming, parks and resorts, cruise ships, consumer products and gaming. . “This ripple effect means that the economics of the system in our film industry have never been stronger,” he added. Disney also announced a strong slate of releases scheduled for 2025, including “Captain America: Brave New World,” “Lilo and Stitch,” “The Fantastic Four: First Steps,” “Zootopia 2,” and “Avatar.” “Fire and Ash”. Management also shared that the ESPN DTC offering is expected to launch in the fall of 2024. This is the latest major strategic move for Disney 2.0. During the call, the team was visibly excited about this launch, noting that it will include ESPN's core services, namely live sports coverage, studio shows and commentary, along with fully integrated betting. “But I think one of the things that has not yet been appreciated is that when you apply technology to sports viewing, almost anything becomes possible. So imagine a dedicated sports center with AI as a feature for example,” Iger said. Given the results and the administration's rosy outlook, it is clear that the worst is behind us. Looking ahead, there's plenty of reason for optimism: A robust content lineup set for the 2025 ESPN DTC broadcast will hit the market next fall. Multiple expansion projects underway at Disney theme parks Several new Disney cruise ships Our Verdict: Disney stock has plenty of upside potential, and we reiterate our #1 rating and $130 price target. DIS Mountain Disney's year-to-date guidance management provided its initial forecast for 2025: high-single-digit earnings growth for the full year versus 2024. This appears to exceed Wall Street's expectations for earnings growth of slightly above 4%. Nearly $15 billion in cash flow from operations versus $14.8 billion expected, and approximately $8 billion in capital expenditures versus $6.54 billion expected. That means free cash flow of about $7 billion versus $8.1 billion expected. $3 billion in stock buybacks. The first quarter will be negatively impacted by hurricanes that forced its Florida theme parks to temporarily close. Disney Why we own it: We value Disney for its best-in-class theme park business, which has tremendous pricing power. We also believe there is more upside in the stock as management cuts costs, expands margins through its direct-to-consumer (DTC) products and finds new ways to monetize ESPN. Competitors: Comcast, Netflix, Warner Bros Discovery, Paramount Global Last purchase: July 29, 2024 Start: September 21, 2021 The entertainment segment is expected to see double-digit percent operating income growth over fiscal 2024, weighted to the first half of the year. Within this sector: DTC's operating income is expected to rise by about $875 million versus 2024. That comes out to roughly $1.018 billion, well above the $969 million that analysts expected. Disney+'s core subscriber count is expected to decline slightly compared to Q4 results. Operating income from content and licensing sales in the current (fiscal first) quarter is expected to be in line with the fourth quarter result, exceeding the expected $71 million. The sports segment is expected to grow operating income by 13% compared to 2024. However, on a reported basis, it is expected to decline by about 10% after adjusting for the impact of operations in India. The Experiences segment is expected to achieve operating income growth of 6% to 8%, most of it coming in the latter half of the year. Much better than expected, considering that the Street wasn't expecting much change at all. Furthermore, the team expects double-digit adjusted earnings growth in both fiscal 2026 and fiscal 2027. Operating cash flow is expected to grow double-digit percent in 2026 versus 2025 guidance. In the entertainment business, the team expects double-digit growth in operating income , with an operating margin of 10% in the live streaming business. Sports is expected to achieve low-single-digit operating income growth versus 2025. Experiences is expected to achieve high-single-digit operating income growth. (Jim Cramer's Charitable Trust is long DIS. See here for a full list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you'll receive a trade alert before Jim takes a trade. 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A Mickey Mouse and Minnie Mouse float passes during the daily Fantasy Parade at Magic Kingdom Park at Walt Disney World on May 31, 2024, in Orlando, Florida.
Gary Hirschhorn | Corbis News | Getty Images
Disney He's back.
After several quarters of cost-cutting and revamping its streaming business, CEO Robert Iger's turnaround plans are starting to pay off: On Thursday, the entertainment giant reported strong quarterly earnings and a strong outlook for next year.
Total revenue in the fiscal fourth quarter was $22.57 billion, topping the $22.45 billion that analysts had expected, according to estimates compiled by LSEG. Adjusted earnings per share (EPS) jumped 39% year over year to $1.14, beating the estimate of $1.10, LSEG data showed.
Disney shares jumped 10% after the results.
