Dow giant Walt Disney reported better-than-expected first-quarter earnings late Wednesday and announced sweeping layoffs and other cost cuts. Activist investor Nelson Peltz ended his proxy battle after the restructuring announcement. DIS stock dipped on Thursday after rising in early trading following the results.
Disney's report rung in the company's first quarterly results with Bob Iger back at the helm. The 15-year Disney veteran came out of retirement to take over as chief executive in late November. Iger replaced Bob Chapek, who succeeded Iger in 2020 following his retirement.
The entertainment giant announced plans to cut 7,000 jobs, or 3% of the workforce as part of a large-scale reorganization. It aims to cut $5.5 billion in costs, including $3 billion from content. Some of those cost cuts were already underway in the latest quarter.
Streaming Showdown
In the streaming wars, competitor Netflix no longer plans to crack down on password sharing. Netflix intended to limit customer account sharing to those living in a single household, according to posts on its help center pages added on Feb 1. But on Saturday, Netflix said it posted the updated password sharing measures by mistake.
Meanwhile, it'll be the first Disney earnings since raising Disney+ prices on Dec. 8. It increased Disney+ prices to $10.99 per month from $7.99 per month. And the price of the Disney Bundle, which includes Disney+, Hulu and ESPN+, rose to $14.99 per month from $13.99 per month.
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Disney Earnings
Expectations: Analysts saw earnings dropping for the second quarter in a row, falling 27.5% to 79 cents per share. Revenue growth targets called for a second consecutive quarter of slowing, up 7.4% to $23.4 billion.
Results: Adjusted earnings slid 6.6% to 99 cents per share and revenue climbed 8% to $23.5 billion.
The number of Disney+ subscribers jumped 24.5% year-over-year to 161.8 million. That was slightly below views for a 162.683 million, but better than some feared. The number of Disney+ users edged lower from Q4's 164.2 million, the first quarter-on-quarter decline.
The total number of subscribers across Disney+, Hulu and ESPN+ rose 19.5% year-over-year to 234.7 million. FactSet predicted total subscribership across Disney+, Hulu and ESPN+, growing 20% year-over-year to 236.32 million.
Operating losses for the direct-to-consumer streaming segment widened to $1.1 billion from $0.5 billion, due to higher programming and production costs, the company reported.
Disney's theme parks showed signs of recovery last year and foot traffic at the "happiest place on earth" continues to pick up. Theme park revenue jumped 21% to $8.74 billion. Watchers expected sales to rise 12.7% to $8.15 billion.
Disney is now embarking on a "significant transformation," CEO Iger said in the release. Walt Disney will "reshape" the company around creativity while reducing expenses, which should lead to growth and profitability for the streaming business, Iger said.
DIS Stock
Disney stock received a host of price target updates after the announcement. In a research note Thursday, Bank of America analyst Jessica Ehrlich wrote she's "encourage" by Iger's strategic vision, adding it is "clearly the first phase in Disney's transformation." Ehrlich raised her price target on DIS stock to 135 from 115 and maintained a buy rating.
Similarly, KeyBanc analyst Brandon Nispel said the cost-savings program underway will help address the main bear cases against Disney. Nispel raised his price target to 130 from 119 and kept the firm's overweight rating on the shares.
DIS stock is trading in a 25 week cup base with a 126.58 buy point according to MarketSmith. Shares jumped 28.7% year-to-date. But they're still down 24% over the past year and well below highs of 197.16 from mid-March 2021.
DIS stock dipped 1.3% by market close Thursday after rising 4.5% in early trading. Shares climbed 0.13% on Wednesday leading up to earnings.
Disney Proxy Truce
Following the earnings and restructuring announcement, activist investor Nelson Peltz called in to CNBC to declare the proxy battle with Disney was over. Peltz, the founder of Trian Fund Management, has a $900 million stake and pushed for a board seat following the Jan. 11 appointment of former Nike CEO Mark Parker to serve as the new board chair. Parker is set to replace Susan Arnold at the next annual shareholder meeting on April 3.
"Now Disney plans to do everything we wanted them to do," Peltz said on CNBC's "Squawk on the Street" on Thursday. "We wish the very best to Bob [Iger], this management team and the board... The proxy fight is over."
In Peltz's nomination, Trian wrote, "we believe that the company's current problems are primarily self-inflected and need to be addressed immediately."
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison
