Disney's Parks and Linear Networks Face Headwinds, Analyst Lowers Expectations For Q4

Needham analyst Laura Martin reiterated a Hold rating on Walt Disney Co DIS.

The analyst lowered her 4Q23 DIS estimates, owing primarily to lower Content Sales, Parks and Experiences, and Linear Networks, partially offset by higher revenue in the DTC segment. 

Martin now expects 4Q revenue of $21.4 billion (up 6% Y/Y, 1% below her prior estimate), operating income of $2.8 billion (up 73% Y/Y, 6% below her previous estimate), and adjusted EPS of $0.76 (up 153% Y/Y, 4% below her prior estimate).

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Martin's Content Sales/Licensing and Other revenue estimates fell due to difficult comps w/ competitor releases and tough comps w/ 4Q22. 

The analyst's segment revenue estimates go to $1.8 billion (up 1% Y/Y, 11% below her prior estimate), and operating income loss of $280 million is (down 57% Y/Y, no change).

Martin's Linear Networks estimates fall due to domestic and ESPN ad weakness. Her Linear Networks segment revenue goes to $6.1 billion (down 4% Y/Y, 1% below her prior estimate), and operating income to $1.6 billion (down 9% Y/Y, 1% below her previous estimate).

Martin's Parks, Experiences, and Products operating income estimates fall owing to lower than previously estimated growth in the domestic parks and higher than previously estimated cost estimates, primarily due to higher hourly wages. 

Her Parks and Experiences segment revenue goes to $8.2 billion (up 10% Y/Y, 3% below her prior estimate), and operating income to $2 billion (up 30% Y/Y, 7% below her previous estimate).

Martin's DTC revenue estimates rise owing to stronger than previously estimated strength in the ad market. Her segment revenue went to $5.6 billion (up 15% Y/Y, 8% above her prior estimate), and she maintained an operating income Loss of $500 million (up 66% Y/Y).

Martin projects FY23 revenue of $89.09 billion (prior $89.25 billion) vs. consensus $89.04 billion, FY24 revenue of $93.52 billion (prior $94.09 billion) vs. consensus $93.74 billion, and FY25 revenue of $97.76 billion. The corresponding EPS is $3.71 (prior $3.74) vs. consensus $3.72, $4.93 (prior $5.00) vs. consensus $4.92, and $5.74.

Price Action: DIS shares traded higher by 2.13% at $84.72 on the last check Monday.