Disney Q4 Earnings: Revenue And Profit Beat, Best Film Studio Performance, 3-Year Outlook And More

Walt Disney Co (NYSE: DIS) reported fiscal fourth-quarter 2024 revenue growth of 6% year-on-year to $22.57 billion, marginally beating the analyst consensus of $22.35 billion. Adjusted EPS of $1.14 beat the analyst consensus of $1.10.

Disney ended the quarter with 174 million Disney+ Core and Hulu subscriptions and over 120 million Disney+ Core paid subscribers, an increase of 4.4 million over the prior quarter.

DIS stock soared after the earnings report. CEO Robert A. Iger said, "In Q4 we saw one of the best quarters in the history of our film studio."

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Segments: Entertainment revenue (which encompasses traditional TV networks, direct-to-consumer streaming, and films) increased by 14% year over year to $10.83 billion.

Sports revenue (mostly comprised of ESPN) remained flat year over year at $3.91 billion.

Experiences revenue (including Disney's theme parks as well as consumer products) climbed 1% year over year to $8.24 billion.

In the Entertainment segment, Linear Networks revenue declined by 6% year over year to $2.46 billion, Direct-to-Consumer revenue climbed 15% year over year to $5.78 billion, and Content Sales/Licensing and Other revenue grew by 39% year over year to $2.59 billion.

The combined DTC streaming businesses improved their profitability with an operating income of $321 million on revenue of $6.3 billion (up by 13% year over year).

Pixar's Inside Out 2 and Marvel's Deadpool & Wolverine helped drive $316 million in operating income at Content Sales/Licensing and Other in the quarter.

The average revenue per user for domestic Disney+ customers dropped from $7.74 to $7.70 due to a higher mix of customers on its cheaper, ad-supported tier. 

The traditional TV networks business continued to decline as consumers dumped TV bundles behind for streaming.

The consolidated operating income grew 23% year over year to $3.66 billion, led by the Entertainment segment's $1.07 billion, the Sports segment's $929 million, and the Experiences segment's $1.66 billion.

Disney generated a fourth-quarter operating cash flow of $5.52 billion (up 15% Y/Y) and a free cash flow of $4.03 billion (up 18% Y/Y).

Outlook: For fiscal 2025, Disney expects to achieve high-single-digit growth in adjusted earnings per share (EPS) compared to 2024 versus a consensus of $4.93.

The company aims to generate around $15 billion in operating cash flow and plans capital expenditures of approximately $8 billion. Dividend increases will align with earnings growth, and Disney targets $3 billion in stock buybacks.

For fiscal 2026, Disney forecasts double-digit growth in adjusted EPS (versus consensus of $5.17) and operating cash flow.

For fiscal 2027, Disney expects to continue its double-digit growth trajectory in adjusted EPS.

Disney J/V: Reliance Industries Limited (RIL), Viacom 18 Media Private Limited, and Disney have finalized the merger of Viacom18's media assets and JioCinema with Star India Private Limited, following approvals from the relevant regulatory bodies.

RIL has invested ₹11,500 crore (about $1.4 billion) in the joint venture to drive its expansion.

The JV is valued at ₹70,352 crore (approximately $8.5 billion) post-money, excluding any anticipated synergies. Ownership is structured with RIL holding 16.34%, Viacom18 owning 46.82%, and Disney holding 36.84%.

The combined entity integrates top brands like ‘Star' and ‘Colors' on television, along with digital platforms ‘JioCinema' and ‘Hotstar,' creating a diverse offering across entertainment and sports for audiences in India and globally.

Iger stated the strategic value of joining forces with Reliance to strengthen Disney's footprint in India and enhance its content portfolio across entertainment, sports, and digital services.

Management Transition: Disney has broadened its search for a new CEO to replace Bob Iger, as the board, led by incoming Chair James Gorman, considers external candidates to ensure a stable succession process.

This expansion moves beyond internal candidates, with potential contenders like Andrew Wilson, CEO of Electronic Arts Inc EA, in the mix.

Disney has enlisted executive search firm Heidrick & Struggles to evaluate external options, identifying at least two additional candidates. Gorman, who will assume the Chair role in January, is pushing for a comprehensive review to find the best successor, with a decision expected by early 2026.

Price Actions: DIS stock is up 9.08% at $112.05 premarket at the last check on Thursday.

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