Disney's Shares Show Signs of Renewed Vitality
Disney's Shares Show Signs of Renewed Vitality
Walt Disney's shares (DIS -1.48%) started strongly on Thursday, boosted by better-than-anticipated financial figures. The share price surged by 8% at the market opening, reaching its highest level in over six months.
At the beginning of the current trading week, I speculated that a robust fourth-quarter report might push Disney shares back above $100 for the first time in months. The outstanding performance is ensuring that the stock won't just be a temporary visitor in the triple-figure category.
Disney's earnings for the most recent quarter narrowly surpassed analyst predictions, both in terms of revenue and income. This is positive. Its future growth projections for the next three years were even more promising. This is excellent.
Minnie's outstanding quarter
Disney recorded a 6% increase in revenue to $22.6 billion for the quarter ending in September, slightly exceeding the $22.4 billion anticipated by analysts. A 14% rise in revenue for its entertainment business was primarily responsible, driven by two box-office hits. Further growth in its streaming business was once again sufficient to counteract a decline in its legacy but temporary linear networks operations.
Disney's sports broadcasting operation remained unchanged. Its theme parks-related experiences segment saw a 1% revenue increase, which was a pleasant surprise. Both rival companies, United Parks (PRKS -4.09%) and Comcast's (CMCSA -2.42%) Universal, which rely on Central Florida as their main market, reported slight declines in revenue and operating profit.
The bottom-line performance was even more impressive. Disney's overall operating profit rose 23% during its fiscal fourth quarter. Adjusted earnings per share soared 39% to $1.14, surpassing the 34% increase set as the profit target by analysts.
A number of factors contributed to Disney's success in the seasonally important summer quarter. The surge in audiences for the films Inside Out 2 and Deadpool & Wolverine saved both Disney and the movie industry. It reversed the segment's $149 million operating loss the previous year, when Disney was struggling to connect with moviegoers, into a $316 million operating profit.
On the streaming front, Disney bolstered its direct-to-consumer business, which was barely profitable in the previous quarter. This turned into a $321 million operating profit in the fourth-quarter update. This is a significant improvement for a business that initially reported a catastrophic operating loss of $1.5 billion in the fourth quarter two years ago.
CEO Bob Iger took over Disney 24 months ago, setting a goal to make its streaming business profitable by the end of fiscal 2024. Mission accomplished.
Oh, Mickey, you're so impressive
Disney provided guidance for the new fiscal year, as well as future projections for fiscal 2026 and 2027. It expects high-single-digit growth in adjusted earnings per share in fiscal 2025.
Prior to Thursday's update, analysts were predicting Disney to post a profit of $5.09 per share in forward earnings, just a 2% increase from the $4.97 per share it reported in fiscal 2024. So, it's clear that analysts will be raising their forecasts in the coming days.
Even better, Disney is now projecting adjusted earnings-per-share growth to double digits in fiscal 2026, as well as fiscal 2027. This projection covers a period beyond Iger's succession plans, but the optimistic outlook is certainly welcome.
Disney is reassuring the doubters following a challenging couple of years. Investors won't have to wait three years to see the media stock flourish. It has two major releases this quarter -- Moana 2 and Mufasa: The Lion King -- which could match this summer's box-office successes.
Disney mentioned on Thursday that dividend growth will follow its bottom-line growth. This suggests that investors can anticipate at least three years of dividend increases, following its recent restoration of the payout. The company plans to complete $3 billion in share repurchases, thereby improving its per-share profitability.
Disney has been a laggard in the stock market over the past couple of years, but the bears appear to be preparing for hibernation now. In a year that saw Disney's domestic theme parks replace Br'er Bear with Princess Tiana, it's good to see the entertainment heavyweight regaining its position as media royalty once again.
In light of Disney's impressive financial performance, I believe it's an opportune time for investors to consider reinvesting some of their money in the company's shares. With Disney's forecast of high-single-digit growth in adjusted earnings per share for the upcoming fiscal year and potential double-digit growth in the following years, investing in Disney could be a profitable move in the finance world.