The Walt Disney Company (DIS) reported better-than-expected Fiscal third-quarter results. The media conglomerate reported adjusted Q3 earnings of $1.39 per share, up by 35% year-over-year, exceeding analysts’ expectations of $1.20 per share.
Additionally, the company’s revenues increased by 4% year-over-year to $23.2 billion, compared to consensus estimates of $23.1 billion.
Disney’s Streaming Business Turns Profitable
In a significant turnaround, Disney’s streaming business reported a $47 million profit, compared to a loss of $512 million last year. However, excluding ESPN+, the Direct-to-Consumer unit had a loss of $19 million. Disney now categorizes ESPN under its Sports unit, with Disney+ and Hulu grouped in the Direct-to-Consumer Entertainment segment.
The streaming business generated revenues of $6.4 billion in the third quarter, up 15% year-over-year. Disney and its peers have been increasingly focusing on achieving profitability in their streaming operations as traditional television continues to lose subscribers.
Disney+ Core subscribers, excluding Disney+ Hotstar in India and other countries, stood at 118.3 million, marking a 1% year-over-year increase at the end of the third quarter. Meanwhile, Hulu’s subscribers grew by 2% year-over-year to 51.1 million.
Moreover, the average monthly revenue per paid subscriber for Disney (including Hotstar) increased by more than 50% year-over-year to $1.05.
Disney’s Q3 Revenue Breakdown
Transitioning to Disney’s Entertainment segment, revenues grew by 4% to $10.58 billion, driven by subscription growth in the Disney+ Core business. This segment comprised more than 45% of Disney’s total revenues in the Fiscal third quarter.
Regarding ESPN, its revenue, excluding Star India, increased by 5% to $4.3 billion, thanks to a 17% rise in domestic advertising. ESPN’s operating income rose 4% to $1.09 billion, reflecting strong performance in the Sports segment.
Despite strong earnings in Entertainment and Sports, U.S. theme parks were impacted by slowing demand and inflation. The overall experiences unit revenue grew 2% to $8.38 billion, with U.S. parks’ operating income down 6% and international parks up 2%. Furthermore, Disney plans to invest $60 billion in its parks over the next decade.
Disney’s FY24 Outlook
In FY24, Disney expects its adjusted earnings per share to grow by 30% year-over-year and has projected the profitability of its Streaming business to improve in the fourth quarter with both its Entertainment Direct-to-Consumer (DTC) business and ESPN+ to be profitable in the quarter.
What Is the Target Price for DIS Stock?
Analysts remain bullish about DIS stock, with a Strong Buy consensus rating based on 21 Buys and five Holds. Over the past year, DIS has increased by more than 4%, and the average DIS price target of $126.64 implies an upside potential of 40.8% from current levels. These analyst ratings are likely to change following DIS’s results today.
