Walt Disney DIS shares powered higher Thursday after the media and entertainment giant posted mixed fourth-quarter earnings but forecast significant cash flow gains, alongside deeper cost cuts, that could restore the group's dividend over the coming year.
Bob Iger, who returned as interim CEO in November of last year, has put reinstating Disney's quarterly dividend at the top of his list of priorities as he seeks to inject new life into its sprawling empire of studios, streaming, sports, theme parks and cruises.
Disney stopped paying its regularly dividend, last pegged at 88 cents a share, during the peak of the covid pandemic in May 2020.
"As I reflect on our achievement this past year, I'm mindful of the fact that a lot of time and effort was spent on fixing, both contending with certain decisions made in the recent past and addressing the numerous challenges brought on by disruption and the pandemic," Iger told investors on a conference call late Wednesday.
"And while we still have work to do to continue improving results, our progress has allowed us to move beyond this period of fixing and begin building our businesses again," he added.
A large part of his turnaround effort was evident in last night's earnings report, which for the first time broke down the group's profits into three major segments, with the ESPN-lead sports division reporting as a stand-alone division.
Sports-focused profits for the fiscal fourth quarter were up 14% from the year-earlier period to $981 million, topping Wall Street forecasts of around $862 million. Revenue was pegged at $3.91 billion.
At a headline level, Disney generated just under $3 billion in operating profit for the three months ended in September as overall revenue rose 5.4% from a year earlier to $21.35 billion.
Disney will speed up cost-cut program
Disney also said it would accelerate its cost-cutting program by around $2 billion, taking it to $7.5 billion a year, and lower its content spending by around $2 billion. Collectively, Disney said that would help it grow free cash flow "significantly," later adding it saw that total at around $8 billion.
"This continued robust free cash flow growth, alongside our strong balance sheet, will position us well to address our investments and shareholder return goals for the year and going forward," said interim Chief Financial Officer Kevin Lansberry. "To that end, we will be recommending to the board that they declare a dividend by the end of this calendar year."
"While this will be just the starting point, we do see ample opportunity to continue to increase shareholder returns in the future as our earnings and free cash flow grow in the form of increased dividends or share buybacks and we look forward to sharing more as we move ahead," he added.
Disney shares, a Dow component, were marked 7.6% higher in early afternoon trading to change hands at $91.01 each, a move that would nudge the stock into a 2.2% gain for the year.
Overall Disney+ paid subscribers rose by 7 million from the previous quarter, the company said, doubling Wall Street forecasts, while Hotstar subs fell by around 4 million to 37.6 million, putting the overall total at 150.2 million.
Streaming-division losses were pegged at $387 million, narrowed from around $1.5 billion in the year-earlier period and the $512 million loss pegged over the previous quarter.
Experiences profit rose 31% from a year earlier to $1.8 billion, topping Wall Street forecasts, thanks to solid gains from international theme parks such as Hong Kong.
The Entertainment division swung to a $236 million profit from a loss of $608 million a year earlier.
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