Disney (DIS) announced it would boost its cash dividend by 50% on Wednesday as the company reported fiscal first quarter earnings that beat expectations while streaming losses narrowed.
Disney reported adjusted earnings of $1.22 a share — a significant beat compared to the $0.99 analysts polled by Bloomberg had expected. The company also guided to full-year fiscal 2024 earnings of $4.60 a share, an increase of at least 20% versus 2023.
Revenue came in at $23.5 billion, a slight miss compared to the $23.8 billion expected.
Disney has been grappling with challenges that include a declining linear tv business, slower growth in its parks business, and losses in streaming. Last year, activist investor Nelson Peltz renewed his push to shake up the board as the stock price hit multiyear lows.
CEO Bob Iger has committed to various cost cuts to combat those challenges. The company said Wednesday it’s on track to meet or exceed its $7.5 billion annualized savings target by the end of fiscal 2024, adding it will “continue to look for further efficiency opportunities.”
The company announced a cash divided of $0.45 a share, an increase of 50% versus the last dividend paid in January. The dividend will be payable on July 25 to shareholders of record at the close of business on July 8.
The board also approved a new share repurchase program, targeting $3 billion in purchases in fiscal 2024.
In another surprising announcement, Disney said it plans to invest $1.5 billion in Fortnite maker Epic Games. Shares jumped about 8% in after-hours trading.
Streaming profitability in focus
Streaming losses within the entertainment division narrowed to $138 million from a loss of $984 million in the prior-year period after the company raised streaming prices; however, core Disney+ subscribers, which excludes its India product Disney+ HotStar, fell sequentially by 1.3 million due to those increases.
The loss of subscribers, in line with company guidance, was slightly higher than Wall Street expected with consensus estimates calling for a loss of about 700,000 Disney+ core users.
The company said it expects to add 5.5 million to 6 million core Disney+ users in the second quarter. It also expects ongoing positive momentum in average revenue per user, or ARPU, after core Disney+ ARPU increased sequentially by $0.14 compared to the fourth quarter.
Including ESPN+, total direct-to-consumer losses amounted to $216 million versus the $1.05 billion reported in the year-earlier period.
“We continue to expect to reach profitability at our combined streaming businesses in the fourth quarter of fiscal 2024,” the company said. “We believe this business will ultimately be a key earnings growth driver for the company.”
Amid recent price hikes, the company will also begin to implement crackdowns on password sharing.
Just ahead of earnings, Disney sent notices to Disney+ users, warning that it will begin to limit account sharing beginning in March. The announcement came just days after Hulu sent a similar notice to subscribers.
Iger, who previously said the number of subscribers sharing accounts is “significant,” first revealed the company will address password sharing during its fiscal 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: Disney Entertainment, which includes its entire media and streaming portfolio; Experiences, which encompasses the parks business; and Sports, which included ESPN networks and ESPN+.
Here’s how those individual segments performed in the quarter versus Wall Street consensus estimates compiled by Bloomberg:
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Entertainment revenue: $9.98 billion versus $10.54 billion expected
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Sports revenue: $4.84 billion versus $4.62 billion billion expected
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Experiences revenue: $9.13 billion versus $9.03 billion expected
Total segment operating income came in at $3.88 billion, a 27% jump compared to the year-ago period.
Entertainment operating income rose above 100% year over year to hit $874 million while the experiences division generated all-time records in revenue, operating income, and operating margin in the first quarter.
The sports segment generated an operating loss of $103 million, but still saw a 37% improvement compared to the $164 million loss it reported in the year-ago period.
On Tuesday, news broke that Disney’s ESPN will team up with Warner Bros. Discovery (WBD) and Fox (FOXA) to launch a new sports streaming service, which is expected to debut sometime this fall.
To note, this is separate from Disney’s ESPN streaming ambitions. The company is still seeking strategic partners, through a joint venture or part ownership, to enable ESPN to launch a flagship direct-to-consumer service in the next few years. Disney reportedly has engaged in talks with the NFL regarding a potential equity stake.
Linear networks, meanwhile, continued to struggle. The segment fell 12% year-over-year to $2.8 billion while operating income for linear came in at $1.2 billion, a decline of 7%.
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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