Dow Jones entertainment powerhouse Disney beat earnings forecasts late Wednesday and raised its ambitious cost restructuring targets. Disney stock rallied early Thursday. Streaming rival Warner Bros. Discovery tumbled Wednesday following its Q3 earnings.
Disney Earnings
The Dow behemoth reported adjusted earnings of 82 cents per share excluding certain items, a 173% increase from 30 cents per share last year. Revenue climbed 5% to $21.24 billion.
Earnings beat FactSet expectations of 71 cents per share but sales growth fell short of expectations of $21.37 billion.
Disney's experiences segment revenue increased 13% to $8.16 billion, edging out estimates of $8.15 billion.
The Disney+ streaming service ended the quarter with a total of 150.2 million subscribers, coming in above forecasts of 148.7 million. Disney reported 146.1 million Disney+ subscribers in Q3, and 164.2 million for Q4 2022.
Overall direct-to-consumer revenue rose 12% to $5.04 billion.
ESPN revenue was flat year-over-year at $3.91 billion.
The Dow behemoth reported earnings declines the past four quarters along with an average 8.5% sales gain during the period.
CEO Bob Iger noted Disney is on track to achieve $7.5 billion in cost reductions, up from its previous restructuring target of $5.5 billion, as the company makes progress on its aggressive cost-cutting goals.
Disney expects free cash flows to improve "significantly" in 2024 from 2023 to approach pre-pandemic levels.
Hulu Deal, ESPN BET Launch
Last Wednesday, Disney announced plans to purchase the remaining 33% stake in Hulu from Comcast-owned NBC Universal. The House of Mouse expects to pay NBCU about $8.61 billion by Dec. 1, based on the terms of an options agreement from 2019. The exact timing is uncertain but the deal should close in the 2024 calendar year.
Disney announced plans early Thursday to launch its ESPN BET online sportsbook across 17 states in the U.S. on Nov. 14, subject to final approvals.
Additionally, ESPN is now using official odds provided by ESPN BET across its editorial and other content. And ESPN's Daily Wager program will rebrand to ESPN BET Live, starting Nov. 10.
ESPN partnered with Penn Entertainment on a gambling sportsbook in August. Under the deal, Penn Entertainment rebranded its Barstool Sportsbook as ESPN BET. Meanwhile, ESPN will use ESPN BET exclusively. And Penn will pay ESPN $1.5 billion cash over 10 years, plus $500 million in warrants to buy PENN stock. In return, Penn will have exclusive rights to the ESPN BET trademark in the U.S. for the next decade.
Disney Stock
Disney stock surged more than 5% early Thursday. Shares rallied 7.2% last week after climbing Thursday and Friday on the Hulu and ESPN BET news.
Disney stock has been in a steady downtrend this year as it contends with bulging content costs, while theme park traffic is bouncing back from pandemic shutdowns.
Disney stock has so far faded 2.6% in 2023 through Wednesday's close.
Warner Bros. Earnings
Warner Bros., the parent company of Max, formerly HBO Max, announced Q3 results early Wednesday.
The media giant reported a loss of 17 cents per share, improved from the loss of 95 cents per share last year. Revenue increased 1.6% to $9.98 billion.
FactSet analysts expected Warner Bros. to report a loss of 9 cents per share on $9.97 billion in sales.
Direct-to-consumer subscribers were 95.1 million for the third quarter, down 700,000 from Q2. Meanwhile, average revenue per user was $7.82 for the period, a 6% increase from 2022, excluding the impact of currency.
Warner Bros. noted the "Barbie" movie was the highest-grossing film in company history, generating nearly $1.5 billion at the box office globally.
WBD stock rose 3% early Thursday to claw back some of its Wednesday losses. Shares dove 19% Wednesday after its results.
The stock climbed in six of the prior seven trading days leading up to earnings.
Shares spiked more than 23% last week after streaming platform Roku rocketed on its Q3 revenue beat and reported 2.3 million new accounts for the period. The move marked the biggest weekly gain for WBD stock since January 2022.
WBD stock fell back below its technical moving averages after reclaiming its 50-day line last week.
Shares are down less than 1% so far this year, having fallen from their 2023 high from late February.
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