Disney (DIS) said it will boost its cash dividend by 50% on Wednesday as the entertainment giant reported fiscal first quarter earnings that beat expectations while streaming losses narrowed.
Investors cheered the report with the stock closing nearly 12% higher on Thursday following the results.
Disney reported adjusted earnings of $1.22 a share — a significant beat compared with the $0.99 analysts polled by Bloomberg had expected. The company also guided to full-year fiscal 2024 earnings of $4.60 a share, an increase of at least 20% versus 2023.
Revenue came in at $23.5 billion, a slight miss compared with the $23.8 billion expected.
It announced a cash dividend of $0.45 a share, an increase of 50% versus the last dividend paid in January. The dividend will be payable on July 25 to shareholders of record at the close of business on July 8.
The board also approved a new share repurchase program, targeting $3 billion in purchases in fiscal 2024.
Disney has been grappling with challenges that include a declining linear TV business, slower growth in its parks business, and losses in streaming. Last year, activist investor Nelson Peltz renewed his push to shake up the board as the stock price hit multiyear lows.
CEO Bob Iger has committed to various cost cuts to combat those challenges. The company said Wednesday it's on track to meet or exceed its $7.5 billion annualized savings target by the end of fiscal 2024, adding it will "continue to look for further efficiency opportunities."
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New announcements: Games, content, sports
Disney had a lot to say on Wednesday with a slew of fresh announcements.
Notably, the company said it plans to invest $1.5 billion in Fortnite maker Epic Games, which Iger called Disney's "biggest entry ever into the world of video games."
"Our new relationship with Epic Games will create a transformational games and entertainment universe that integrates Disney's world-class storytelling into Epic's cultural phenomenon, Fortnite, enabling consumers to play, watch, create, and shop for both digital and physical goods," Iger said on the earnings call.
On the content side, the company said Disney+ will be the exclusive streaming home for "Taylor Swift: The Eras Tour (Taylor's Version)." The concert film will feature five additional acoustic songs, including "Cardigan."
Meanwhile, an animated "Moana" sequel will hit theaters in November as Disney leans deeper into sequels and franchises amid a struggling box office.
Disney also announced a firmer timeline for the company's over-the-top (OTT) ESPN streaming service, revealing the platform will launch in fall 2025.
The development comes after news broke that Disney's ESPN 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.
Streaming profitability in focus
Streaming losses within the entertainment division narrowed to $138 million from a loss of $984 million in the prior-year period after the company raised streaming prices; however, core Disney+ subscribers, which excludes its India product Disney+ HotStar, fell sequentially by 1.3 million due to those increases.
The loss of subscribers, in line with company guidance, was slightly higher than Wall Street expected, with consensus estimates calling for a loss of about 700,000 Disney+ core users.
Disney said it expects to add 5.5 million to 6 million core Disney+ users in the second quarter as Charter cable subscribers begin to receive complimentary Disney+ subscriptions as part of their packages.
The company also expects ongoing positive momentum in average revenue per user, or ARPU, after core Disney+ ARPU increased sequentially by $0.14 compared to the fourth quarter.
Including ESPN+, total direct-to-consumer losses amounted to $216 million versus the $1.05 billion reported in the year-earlier period.
"We continue to expect to reach profitability at our combined streaming businesses in the fourth quarter of fiscal 2024," the company said. "We believe this business will ultimately be a key earnings growth driver for the company."
Amid recent price hikes, the company will also begin to implement crackdowns on password sharing. Disney said it likely won't see "notable benefits" from these initiatives until the second half of this year.
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 on the floor of the New York Stock Exchange (NYSE) in New York, on Dec. 14, 2017. (Brendan McDermid/REUTERS) ·Reuters / Reuters
As a reminder, Disney recently adjusted its reporting structure after CEO Bob Iger reorganized the company into three core business segments: Disney Entertainment, which includes its entire media and streaming portfolio; Experiences, which encompasses the parks business; and Sports, which includes ESPN networks and ESPN+.
Here's how those individual segments performed in the quarter versus Wall Street consensus estimates compiled by Bloomberg:
Entertainment revenue: $9.98 billion versus $10.54 billion expected
Sports revenue: $4.84 billion versus $4.62 billion billion expected
Total segment operating income came in at $3.88 billion, a 27% jump compared to the year-ago period.
Entertainment operating income rose above 100% year over year to hit $874 million, while the experiences division generated all-time records in revenue, operating income, and operating margin in the first quarter.
The sports segment generated an operating loss of $103 million but still saw a 37% improvement compared to the $164 million loss it reported in the year-ago period.
Linear networks, meanwhile, continued to struggle. The segment's revenue fell 12% year over year to $2.8 billion, while operating income for linear came in at $1.2 billion, a decline of 7%.
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
