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Warner Bros. Discovery stock plunges as movie flops ‘The Color Purple,’ ‘Aquaman’ sink earnings

Warner Bros. Discovery on Friday reported worse-than-expected quarterly earnings — due in large part to box office flops from its movie studio — sending the media giant’s shares plummeting more than 9% in midday trading.

The David Zaslav-run company — which along with Warner Bros. studios, owns CNN, TNT and streaming service Max — reeled in fourth quarter revenue of  $10.28 billion, missing  analysts’ average estimate of $10.35 billion.

Excluding items, the company lost 16 cents a share, larger than Wall Street’s expectations for a loss of 7 cents.

However, studio business revenue sank 17% in the fourth quarter, following lackluster results from highly-anticipated releases such as the musical version of “The Color Purple,” featuring Fantasia Barrino and Taraji P. Henson, and “Aquaman and the Lost Kingdom,” starring Jason Momoa.

Warner Bros. Discovery boss David Zaslav acknowledged that a string of flops from the “underperforming” movie business weighed down the company’s results. REUTERS

“Bottom line, the studio has really been underperforming, including the end of the year where we had some real struggle,” Zaslav said on a conference call following release of the report.

“But we’re very optimistic about this year and it has given us a chance to have a lot of upside in the next two years. I mean, it was really a struggle.”

“The Color Purple” grossed just $68 million against a reported budget of nearly $100 million, while the “Aquaman” sequel reaped $433 million worldwide, but had a reported budget near $215 million. The first film grossed $1 billion. 

The poor returns came despite the massive success of with “Barbie,” starring Margot Robbie and Ryan Gosling, which reeled in $1.45 billion at the global box office.

WBD Chief Financial Officer Gunnar Wiedenfels said the company has high hopes for its next action flick, “Superman: Legacy,” but also admitted that there are “some real challenges” on the “superhero side.”

The musical version of “The Color Purple” reeled in just $68 million at the box office against a $100 million budget. AP

“On the film side, obviously this is going to continue to be a hit-driven business,” he said. “And, you know, just last year was a great example with the greatest success in the film studios history and some real challenges across the industry on the on the superhero side.”

There was some good news in WBD’s other sectors. In the direct-to-consumer segment, which includes the firm’s streaming platforms, revenue rose 3% to $2.53 billion.

The “Aquaman” sequel was also a dud, bringing in nearly $433 million–a far cry from the $1 billion box office sales from the first film. Courtesy of Warner Bros. Pictures/⢠& © DC Comics

Free cash flow rose 33% to $3.31 billion in the quarter, above the $2.5 billion that analysts had expected.

While Lightshed Partners analyst Rich Greenfield touted the company’s free cash flow — which was brought about mainly from steep cost-cutting — he said Zaslav hasn’t yet shown the market the company can grow.

The company has struggled to bring in another hit like “Barbie,” which amassed nearly $1.5 billion in box office sales. AP

“The challenge is they haven’t been able to grow the business,” Greenfield told Yahoo Finance.

“What you’re seeing from investors is that It’s hard to pay meaningfully for a company if they do not believe that there is future revenue and earnings growth. So, you can cut and certainly generate cash on the short-term, but cost-cutting is not a long-term strategy…”

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