Disney Beats Profit Estimates Amid Deeper Cost Cuts as Bob Iger Faces Activist Investors

Disney on Wednesday reported better-than-expected quarterly earnings, helped by rising theme park attendance, an aggressive cost-cutting plan and narrowing losses in its streaming business, as CEO Bob Iger seeks to defend itself against challenges to its leadership from activist investors.

Iger stated that the Mouse House is entering a new phase of rebuilding after a massive restructuring, putting the company on track to achieve approximately $7.5 billion in cost cuts, an increase of $2 billion from $5.5 billion. of dollars previously announced at the beginning of the year.

“While we still have work to do, these efforts have allowed us to move beyond this fix period and begin building our businesses again,” Iger said on a conference call after the company reported fourth-quarter results.

“We have a strong foundation of creative excellence and innovation built over the last century, which has only been reinforced by the significant restructuring and profitability work we have undertaken this year.”

CEO Bob Iger said Wednesday that Disney is entering a new phase of construction, after a period of deep cost cuts.

Shares of Mouse House, which have languished near nine-year lows, rose nearly 4% in after-hours trading Wednesday.

The 100-year-old entertainment giant is once again under pressure from activist shareholder Nelson Peltz, whose Trian Fund Management is expected to seek board seats. Billionaire and former Marvel executive Isaac “Ike” Perlmutter has said he has entrusted his stake in Disney to Trian for that effort, giving the fund control over a stake valued at more than $2.5 billion. This was reported by the Wall Street Journal.

Trian had pushed for a board seat in January but ended its proxy fight a month later after Iger unveiled restructuring plans aimed at saving $5.5 billion.

For the quarter ended Sept. 30, Disney’s net income rose 63% to $264 million, or 14 cents, compared to year-ago revenue of $162 million, or 9 cents per share. Adjusted EPS totaled 82 cents, better than Wasll Street’s EPS estimate of 70 cents.

Strength in Disney’s theme parks and narrowing streaming losses helped the Mouse House beat earnings expectations.

Revenue rose 5% to $21.24 billion, missing expectations of $21.33 billion.

Falling advertising revenue at the company’s television stations, such as ABC, caused Disney to report its second consecutive revenue loss.

Over the summer, Iger said he was busy selling the company’s television properties, including National Geographic, FX, ABC and others. Iger is also looking to sell a minority stake in sports network ESPN.

Iger said this summer that he is considering selling a minority stake in sports network ESPN.

Disney’s entertainment division, which includes television networks and movie studios, generated $9.5 billion in revenue, of which more than $5 billion was direct-to-consumer. Revenue was $236 million, with all gains from linear networks offsetting losses on streaming services like Disney+.

Disney said its streaming business, which has been losing money since the launch of Disney+ in late 2019, is making progress to reduce its losses. The business, which also includes Hulu and ESPN+, lost $387 million in the quarter, down from $1.47 billion a year earlier.

Although Disney is in the process of streamlining and growing the business, it faces a power battle with Nelson Pelz, who is pushing for board seats.
Bloomberg via Getty Images

In its sports unit, ESPN saw revenue rise slightly to $3.8 billion, and operating income rose 16% to $987 million.

Finally, in theme parks and experiences, revenue increased 13% to $8.2 billion, and operating income increased 31% to $1.8 billion. Higher attendance at Shanghai Disney, Hong Kong Disneyland and Disneyland resorts, and growth in cruise business, helped offset lower results at Walt Disney World in Florida.

While Wednesday’s earnings lifted Disney’s stock price, it’s been a tough year for the Mouse House, whose stock price has fallen below $90 for most of the year. That’s less than half its share price just two years earlier.

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