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Disney Raises Cash Dividend by 50% as Q1 Earnings Beat Expectations and Streaming Losses Narrow

Disney Boosts Dividend by 50% as First Quarter Earnings Beat Expectations

Disney (DIS) announced a 50% increase in its cash dividend as the entertainment giant reported better-than-expected fiscal first quarter earnings, with narrowing losses in its streaming business. The company’s adjusted earnings of $1.22 per share significantly surpassed analysts’ estimate of $0.99. Disney also provided upbeat guidance for its full-year fiscal 2024 earnings, projecting a minimum 20% increase compared to 2023.

Although revenue fell slightly short of expectations at $23.5 billion, Disney’s promising earnings news drove its shares up by 7% in premarket trading on Thursday.

New Dividend and Share Repurchase Program

Disney announced a cash dividend of $0.45 per share, reflecting a 50% increase compared to the previous dividend paid in January. Shareholders of record at the close of business on July 8 will receive the dividend on July 25. Additionally, the company’s board authorized a new share repurchase program for fiscal 2024, planning to target $3 billion in share purchases.

Tackling Challenges and Cost Cuts

Disney has faced challenges in its linear TV and parks businesses, as well as losses in streaming. Activist investor Nelson Peltz renewed his push to shake up the board as the company’s stock price hit multiyear lows. In response, CEO Bob Iger committed to various cost-cutting measures to address these challenges.

The company is on track to surpass its $7.5 billion annualized savings target by the end of fiscal 2024 and continues to search for further efficiency opportunities. Disney anticipates its streaming businesses to reach profitability by the fourth quarter of fiscal 2024 and believes they will play a key role in the company’s earnings growth.

New Announcements: Epic Games Partnership and Exclusive Content

Disney made several significant announcements, including a $1.5 billion investment in Epic Games, the creator of Fortnite, marking its largest foray into the world of video games. This partnership aims to integrate Disney’s storytelling into Fortnite, enabling consumers to engage with the franchise through various avenues.

On the content front, Disney revealed that its streaming service, Disney+, will exclusively stream “Taylor Swift: The Eras Tour (Taylor’s Version),” including five additional acoustic songs. Additionally, a sequel to the animated film “Moana” is set to hit theaters in November as part of Disney’s focus on expanding its sequels and franchises.

The company also shared a firm timeline for the launch of its over-the-top (OTT) ESPN streaming service, stating that it will debut in fall 2025. This follows Disney’s collaboration with Warner Bros. Discovery and Fox to set up a new sports streaming service, slated for launch this fall.

Focus on Streaming Profitability

Disney’s streaming losses, excluding its India product Disney+ HotStar, narrowed to $138 million compared to a loss of $984 million in the prior-year period following the recent price hike. However, the company observed a sequential decline of 1.3 million core Disney+ subscribers due to the price increase, slightly higher than the estimated loss of 700,000 subscribers.

Disney expects to gain 5.5 to 6 million core Disney+ users in the second quarter. It also foresees continual positive momentum in average revenue per user (ARPU) after a $0.14 increase in core Disney+ ARPU in the fourth quarter.

Including its ESPN+ service, Disney’s total direct-to-consumer losses amounted to $216 million, substantially reduced from the $1.05 billion reported in the year-ago period. The company plans to crack down on password sharing, though significant benefits from these efforts are not expected until the second half of this year.

Disney recently sent notices to Disney+ users, indicating its plans to limit account sharing starting in March. This announcement aligns with a similar notice from Hulu, a Disney-owned service.

Further Performance and Financial Highlights

Disney’s revenue and operating income across its business segments this quarter were as follows:

  • Entertainment revenue: $9.98 billion (compared to the expected $10.54 billion)
  • Sports revenue: $4.84 billion (compared to the projected $4.62 billion)
  • Experiences revenue: $9.13 billion (compared to the anticipated $9.03 billion)

Disney’s total segment operating income experienced solid growth, jumping 27% to $3.88 billion year-over-year. The entertainment segment’s operating income surged to $874 million, significantly surpassing the prior-year figure, while the experiences division achieved record revenue, operating income, and operating margin in the first quarter. The sports segment reduced its operating loss by 37% compared to the same period last year.

Alexandra Canal is a Senior Reporter at Yahoo Finance.

Follow her on Twitter @allie_canal.

Contact her via LinkedIn or email at [email protected].

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