Disney reported its fourth quarter financial report that beat what analysts were expecting. For the quarter the company reported earnings per share of $1.48 versus the $1.34 expected by Wall Street. Revenue also beat easily at $14.31 billion compared to the $13.73 billion expected.
Analysts chimed in on what they thought of the company’s earnings with Morgan Stanley saying, “With fiscal fourth-quarter results ahead of estimates driven by Studio and content licensing, the Fox transaction likely closing earlier than expected, and an April investor day planned to lay out specific plans for Disney’s streaming ambitions, we reiterate our bullish outlook for shares. … Direct-to-consumer (DTC) strategy ramps in FY19 ahead of Disney Plus launch, more clarity on financial impact forthcoming: The broader financial impact of Disney’s direct-to-consumer streaming plans will depend on the timing of deal close with Fox, but independently Disney continues to invest in content for both its ESPN Plus and Disney Plus products.”
Bank of America Merrill Lynch said, “Disney fiscal fourth-quarter results were well ahead of expectations, as strong Studio and Media Networks were partially offset by softer Theme Parks. All-in, DIS rev. grew +12% and segment operating income grew +17%, exhibiting significant operating leverage. Key drivers include: (1) better Cable Network operating income as a -6% decrease in ESPN adv., BAMTech dilution and higher prog. were partially offset by +5% affiliation fee growth, (2) strong Broadcasting operating income as retrans/political were aided by strong licensing (Blackish / Runaways / Cloak & Dagger / Iron Fist), (3) soft equity on greater Hulu losses / A&E drag.”
Goldman Sachs remarked, “Relative to Goldman Sachs’s estimate, a 1% operating income miss was more than offset by a lower-than-expected tax rate. The operating income miss was driven by Theme Parks, partially offset by beats in Studio and Broadcasting. … The Studio beat was driven by higher-than-expected international theatrical revenue and international content licensing, while the Broadcasting beat was driven by program licensing. Ironically, much of this quarter’s upside and growth was driven by the licensing of film and TV content to third parties, and much of the earnings call focused on Disney’s strategic shift to direct-to-consumer, which will de-emphasize these wholesale revenue streams.”
Barclays wrote, “Disney now expects the Fox deal to close in 1Q’19, ahead of earlier commentary that implied a mid 2019 close. There has been some concern among investors about approval in China which should be assuaged with this new timeline. Disney also announced plans to host an Investor Day in April 2019, to announce more details on its OTT strategy. We expect this to be a material catalyst for the stock, especially if the company provides enough details around investment needs of the service to de-risk estimates.”
Jefferies also said, “Disney reported solid fiscal fourth-quarter results, with EPS of $1.48 ahead of our $1.32, on strong Studio and Media results. The call largely focused on what lies ahead for Disney – the acquisition of the FOX assets, greater control of Hulu, and Disney+. FOX Deal on Track for Spring Close. Disney expects the FOX deal will close by the end of C1Q/early April, and expects to hold an investor day in April to discuss the deal, and the DTC products. Total company affiliate revenue grew 5% in the quarter, benefiting 7% from rate (retrans and cable), offset by 1% sub losses and 1% from F/X.”
The name of the company’s new streaming service to rival Netflix was also announced by company CEO Bob Iger on the company’s earnings call. He said, “Our Disney-branded service, which we’re officially calling Disney+, will be in the U.S. market late next year, offering a rich array of original Disney, Pixar, Marvel, Star Wars and National Geographic content, along with unprecedented access to our incredible library of film and television content, including all of our new theatrical releases starting with the 2019 slate.”
Iger added, “We’ve already announced the robust pipeline of Disney+ original content currently in production, including The Mandalorian, the world’s first live action Star Wars series written and produced by Jon Favreau.”
“As you know, John launched the Marvel Cinematic Universe with Iron Man. He also redefined live action story-telling in Jungle Book and he’s doing it again with Lion King. So we’re thrilled to have him creating content for this new platform. addition to putting together a great story and strong cast, Jon’s got an unbelievable collection of talent behind the camera, including Taika Waititi, the Director of Thor: Ragnarok.”
Disney will be removing its content from rival Netflix next year with the service expected to launch late 2019.