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Investors to focus on profits amid proxy battle noise


Disney (DIS) will report its fiscal first quarter earnings after the bell on Wednesday as CEO Bob Iger attempts to drown out proxy battle noise and focus on profits.

The company is widely expected to lose subscribers in the quarter on the heels of another round of price hikes that hit users in October. Streaming profitability, however, should be the main focus as investors will look for execution on cost-cutting initiatives implemented one year ago.

“Parks and linear networks are important earnings drivers, but an improving narrative around long-term streaming profitability seems to be the best path to materially re-rate Disney’s price-to-earnings multiple,” MoffettNathanson analyst Michael Nathanson wrote in a note to clients ahead of the results.

Here’s what Wall Street expects from the media giant, according to consensus estimates compiled by Bloomberg:

  • Total revenue: $23.80 billion

  • Adjusted earnings per share: $1.01

  • Entertainment revenue: $10.54 billion

  • Sports revenue: $4.62 billion

  • Experiences revenue: $9.03 billion

  • Disney+ subscribers (including India’s Disney+ Hotstar): 174,000 quarterly net losses expected

Streaming profitability in focus

Management has consistently reiterated that streaming will reach profitability by the end of 2024.

In its last earnings report, the company reported direct-to-consumer (DTC) losses within its entertainment division of $420 million. Including ESPN+, total DTC losses amounted to $387 million. The company guided to similar losses for its fiscal Q1 results.

Amid recent price hikes, the company will also begin to implement crackdowns on password sharing.

Just ahead of earnings, Disney sent notices to Disney+ users, warning that it will begin to limit account sharing beginning in March. The announcement came just days after Hulu sent a similar notice to subscribers.

Iger, who previously said the number of subscribers sharing accounts is “significant,” first revealed the company will address password sharing during its fiscal third quarter earnings call in August.

A screen shows the logo and a ticker symbol for The Walt Disney Company.

A screen shows the logo and a ticker symbol for The Walt Disney Company on the floor of the New York Stock Exchange (NYSE) in New York, on Dec. 14, 2017. REUTERS/Brendan McDermid (Reuters / Reuters)

All eyes on new CFO amid profit push

Notably, this will be the first earnings report for the company’s new CFO, Hugh Johnston.

Wall Street analysts will anxiously be awaiting any key messages regarding his priorities, particularly when it comes to rightsizing costs and achieving profitability.

Disney CEO Bob Iger committed to various cost cuts after slashing $7.5 billion in 2023.

Most recently, Disney’s animation unit, Pixar, will reportedly lay off as much as 20% of its 1,300 employees, according to TechCrunch.

The cuts come as streaming profitability lags while the company’s box office has struggled in recent quarters. Analysts largely expect the studio unit to underperform in the quarter on the heels of lackluster titles, including “Wish” and “The Marvels.”

Disney is also in the process of unloading non-core assets. The company recently reached a preliminary agreement to sell 60% of its India unit to Reliance-backed Viacom18 in a deal that values the overseas conglomerate at $3.9 billion, according to The Wall Street Journal.

ESPN’s streaming future

Sports, particularly the future of ESPN’s streaming ambitions, also should be a central focus of the call.

The results are set to arrive just one day after news broke that Disney’s ESPN (DIS) will team up with Warner Bros. Discovery (WBD) and Fox (FOXA) to launch a new sports streaming service, which is expected to debut sometime this fall.

To note, this is separate from Disney’s ESPN streaming ambitions. The company is still seeking strategic partners, through a joint venture or part ownership, to enable ESPN to launch a flagship direct-to-consumer service in the next few years.

Disney reportedly has engaged in talks with the NFL regarding a potential equity stake.

Proxy battle woes

In the background, investors are still grappling with an ongoing question: Will activist investor Nelson Peltz of hedge fund Trian Management succeed in shaking up the entertainment giant’s board?

Stockholders are unlikely to get an answer anytime soon. If the proxy battle continues to a vote, a shareholder meeting set to take place on April 3 will ultimately determine the board’s fate.

Wall Street watchers have viewed the battle as a noisy distraction for CEO Bob Iger, who’s currently in the midst of resetting the company’s strategy. Nevertheless, the proxy fight continues to serve as a lingering overhang, clouding that goal.

Disney stock has bounced back from the multiyear lows it hit in 2023, with shares up nearly 10% since the start of the year, outpacing the S&P’s 4% gain during that time period.

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.

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