Since his welcomed return, investors will be hoping to see a decent quarter on the back of major cost cutting measures and improvements he’s been able to put into motion so far this year.
Is Disney undervalued ahead of its Q2 earnings release on Wednesday after market close? We’ll take a look at what’s happening at the company and what to expect for the most recent quarter.
Weekly chart from The Walt Disney Company (DIS) – Source: TradingView
Returning CEO Back to Right the Ship
Traders and investors will be monitoring Disney’s performance to gauge the impact of Bob Iger’s return as CEO. After a two-year absence, Iger was reinstated to the top job at Disney after the company suddenly fired his previously handpicked successor for CEO, Bob Chapek. This was apparently in response to a number of complaints, but most notably for an earnings report that revealed their streaming services platform had lost close to $1.5 billion in just three months and the resulting tumbling of share prices.
Iger served as Disney’s CEO from 2005 to 2020, and is best known for the acquisitions of Pixar in 2006, Marvel in 2009, Lucasfilm in 2012, and 21st Century Fox in 2019, along with the debuts of the Disney+ streaming service in November 2019 and ESPN+ in 2018. He is also recognised for the historic opening of Shanghai Disney Resort, Disney’s first theme park and resort in mainland China, as well as the release of several blockbuster standalone movies and franchises.
One of the major announcements for investors from the last earnings call in February, was that despite the plan for cutting costs, Iger intends to persuade Disney’s board to bring back the dividend that was cut in early 2020 by the end of 2023.
He also unveiled a plan to join a whole host of other major corporations cutting costs and reducing their workforces this year. Disney eventually aims to lay off a staggering 7000 staff, or just over 3.5% of their workers globally, while reducing costs by around $5.5 billion.
Along with the scheduled layoffs which have already begun, was also a plan to restructure operations to give its creative leaders back control of decision-making. Iger’s goal is to develop a business strategy that is more organized, streamlined and ultimately will be more profitable for shareholders.
New Offerings for Park Goers
The renewed focus on the company’s parks and experiences is one way that Iger hopes to repair issues with the company’s image, especially since the risks associated with the pandemic are now in the rear vision mirror.
On Monday, Disney announced a number of changes coming to Walt Disney World in the coming year, including the return of Disney dining plans and the introduction of no-reservation days for annual passholders and Disney cast members.
Guests booking a stay at a Disney Resort hotel in early 2024 will once again have the opportunity to add on a Disney meal plan to their holiday package. In addition to the Disney Dining Plan, guests would also be able to use the Disney Quick Service Dining Plan
Additionally starting on January 9, 2024, theme park reservations will no longer be necessary in order to purchase date-based tickets. Tickets with specific dates printed on them are the default choice for visitors. There is a possibility that reservations are still necessary for other forms of entry, including non-dated tickets though.
Disney also said that it would continue to provide early theme park access to customers staying at Disney resorts for trips through next year, and that it is developing options for guests to pre-plan their visits with its Genie+ service and individual Lightning Lane choices.
What to Expect for Q2
Disney+’s growth in the next quarter is anticipated to have been hampered by fierce competition from other major services like Netflix and Amazon Prime Video among others.
The inability to retain IPL India cricket broadcasting rights, as well as an increase in membership prices, might hurt Disney+ subscriber levels too. It was earlier hoped by Iger that the streaming service would be turning a profit by 2024, but with expenses running wild last year, it’s hard to see this becoming a reality any time soon.
In the meantime, with higher participation rates since the close of the pandemic, the company’s parks, experiences and products should help to boost earnings. During the holiday quarter, the sector that includes the company’s gated attractions, cruise ships, and consumer items saw a 21% increase in growth.
According to Zacks Investment Research, six analysts have forecast that the company will have earnings per share of $0.88 for the quarter. During the same period last year, earnings per share amounted to $1.08. Revenues are expected to hit $21.73 billion, up 12.9% from the same period last year, according to the latest consensus estimate.
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