The Walt Disney Co. (NYSE:DIS) reported strong Fiscal second quarter earnings, with adjusted earnings of $1.21 per share, compared to earnings of $0.93 per share in the same period last year. Analysts were expecting the company to report earnings of $1.10 per share.
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Disney reported Q2 revenues of $22.1 billion, marking a 1% year-over-year increase and aligning with estimates. The company’s strong performance was chiefly propelled by its Experiences segment, particularly its theme parks, and its thriving streaming business.
Disney’s Experiences Business
In the second quarter, the company’s Experiences segment, which encompasses its theme parks and consumer products, experienced a notable 10% year-over-year revenue increase to $8.4 billion. Concurrently, its operating income surged by 12% year-over-year to $2.3 billion.
In Q2, the Experiences business accounted for over 35% of Disney’s total revenues, compared to a share ranging from 30% to 35% in the same period last year.
Disney’s Direct-to-Consumer Business Turned Profitable
In Q2, Disney’s Streaming revenue (excluding ESPN+) grew 13% year-over-year to $5.64 billion. Operating income reached $47 million, marking a significant turnaround from a loss of $587 million in the same period last year. This quarter marked the first time Disney’s streaming business achieved profitability. The growth was attributed to a rise in Disney+ subscribers and increased average revenue per user (ARPU).
Indeed, Disney+ Core subscribers surged by over 6 million to reach 117.6 million in the second quarter. Additionally, Disney+ Core ARPU increased by $0.44 quarter-over-quarter, reaching $7.28.
The company maintains its expectation that its combined streaming business will remain profitable.
DIS’ FY24 Guidance
In FY24, the company has raised its adjusted EPS growth target to 25% and stays on course to generate approximately $14 billion of operating cash flows and over $8 billion of free cash flow. Free cash flow (FCF) is defined as the cash that remains after accounting for the cash required to support its operations and sustain its capital assets.
Separately, the company repurchased $1 billion of stock in the second quarter and expects to continue to return capital to its shareholders.
Is Disney a Buy, Sell or Hold?
Analysts remain bullish about DIS stock, with a Strong Buy consensus rating based on 24 Buys, three Holds, and one Sell. Year-to-date, DIS has increased by more than 25%, and the average DIS price target of $128.93 implies an upside potential of 10.7% from current levels. These analyst ratings are likely to change following the company’s Fiscal second quarter results today.
