Disney Shares Surge On Q3 Earnings Beat, Then Plummet On Hulu Cost Concerns: What You Need To Know

Walt Disney Co. DIS shares initially traded higher following the announcement of better-than-expected fiscal third-quarter earnings, but later reversed direction due to concerns over a potential $5 billion additional payment for its Hulu stake.

What To Know: Disney reported a 4% year-over-year increase in revenue, reaching $23.16 billion, slightly surpassing the analyst consensus estimate of $23.11 billion. The company’s adjusted earnings per share came in at $1.39, exceeding the expected $1.20.

Related Link: Disney’s Q3 Earnings: Revenue And EPS Beat, Streaming Business Turns Profitable, Strong ESPN Revenue Boost

One accomplishment for Disney this quarter was achieving profitability in its combined streaming business, which encompasses Disney+, Hulu, and ESPN+. The streaming division recorded an operating profit of $47 million, marking a significant improvement from a loss of $512 million in the same period last year. However, it’s worth noting that the direct-to-consumer streaming segment, excluding ESPN+, still incurred a loss of $19 million.

Looking ahead: Disney has increased its adjusted EPS growth target for fiscal 2024 to 30%, up from the previous target of 25%, compared to the consensus estimate of $4.77. The company anticipates modest growth in Disney+ Core subscribers and expects enhanced profitability in its combined streaming operations by the fourth quarter.

What Else: Concerns over a potential $5 billion additional payment for Disney’s stake in Hulu have also negatively impacted investor sentiment, causing Disney shares to reverse their initial post-earnings gains.

Additionally, Disney’s CFO noted the positive impact of streaming service bundling on cancellations, with advertising revenue up 8% for the quarter, described as “very healthy.”

DIS Price Action: Walt Disney shares were down by 3.10% at $87.15 according to Benzinga Pro.

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