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Disney’s shares slide despite earnings beat

Wednesday, May 08, 2024

Today’s headlines

What’s happening: Shares of Walt Disney Company fell on Tuesday, after the company released results for its fiscal second quarter.

What happened: The entertainment giant reported better-than-expected earnings for the quarter.

Although Disney recorded an unexpected profit in its streaming entertainment segment, weakness in its TV business exerted pressure on the stock.

How were the results: The Burbank, California-based company reported some growth in sales for its fiscal second quarter.

  • Revenues grew by 1% year-over-year to $22.08 billion, missing the consensus estimates of $22.11 billion.
  • Adjusted earnings came in at $1.21 per share, surpassing Wall Street expectations of $1.09 per share.

Why it matters: Consumers have been steadily shifting from traditional TV to streaming entertainment. This trend weighed on Disney’s cable business. The company’s revenues from the television business contracted 8% year-over-year to $2.77 billion, while operating profits plummeted 22%.

Disney’s streaming segment has been losing money since the debut of Disney+ in 2019 and is projected to become profitable by September.

The company’s direct-to-consumer (D2C) entertainment segment, including Disney+ and Hulu, recorded an operating income of $47 million for the latest quarter, versus a year-ago loss of $587 million. D2C revenues surged 13% to $5.6 billion in the quarter.

Entertainment revenues fell 5% year-over-year to $9.8 billion. Linear Networks recorded an 8% year-over-year decline in revenue to $2.8 billion, while Content Sales/Licensing and Other revenue tumbled by 40% to $1.4 billion.

Sports revenues grew by 2% year-over-year to $4.3 billion, while Experiences revenues surged 10% to $8.4 billion.

Increased attendance and prices at the Hong Kong Disneyland Resort provided a boost to the Experiences segment. Revenues from US parks and experiences rose 7% to $5.96 billion, while International sales jumped 29% to $1.52 billion last quarter.

Disney’s consolidated operating income surged by 17% to $3.8 billion, with its streaming applications, Disney+ and Hulu notching a quarterly profit for the first time.

The company’s subscribers for Disney+ Core rose to 117.6 million globally, compared to 111.3 million in the year-ago quarter, while Hulu subscribers climbed to 50.2 million, from 49.7 million. However, ESPN+ subscribers fell to 24.8 million, from 25.2 million in the prior quarter.

Management projected adjusted earnings growth of 25% for fiscal 2024.

How shares responded: Disney’s shares fell 9.5% to close at $105.39 on Tuesday, following the release of quarterly results. The stock has climbed around 25% over the past six months.

What to watch: Investors will watch the company’s streaming business, which is expected to significantly impact overall results ahead.

The markets today

The British pound will be in focus today ahead of the Bank of England’s policy announcement

Context: The GBP/USD forex pair fell on Tuesday as investors assessed the latest economic reports.

Details: The British pound has performed better than its major peers so far in 2024, falling just 1.5% year-to-date versus the US dollar, while the EUR/USD has declined around 2.5% and JPY/USD has lost about 8.5% year to date.

UK’s inflation eased to 3.2% in March, the lowest level since September 2021, representing a significant deceleration from the peak of 11.2% recorded in October 2022.

The Bank of England is scheduled to announce its policy decision on Thursday, with markets widely expecting policymakers to cut the benchmark interest rate by 25 basis points at least twice this year.

Data released on Tuesday showed that the S&P Global UK construction PMI improved to 53.0 in April, from 50.2 in March, while the Halifax House Price Index rose by 1.1% year-over-year in April, compared to a 0.4% rise in March.

Strength in the US dollar also exerted pressure on the GBP/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, settled at 105.41 on Tuesday.

The GBP/USD forex pair fell around 0.4% to 1.2510 on Tuesday. London’s FTSE 100 jumped 1.22% to close at 8,313.67.

What to watch: With no major economic data releases this week, investors will watch the Bank of England’s interest rate decision on Thursday. The central bank is widely expected to keep rates unchanged at this meeting.

Data on economic growth for the first quarter will be released on Friday. Experts project the UK’s GDP growth to come in at 0.4%, after a 0.3% decline in the previous quarter.

Other Markets: US trading indices closed mixed on Tuesday, with the Dow Jones index and S&P 500 up by 0.08% and 0.13%, respectively, and the Nasdaq 100 down by 0.01%.

The news shaping the markets

The SBU (Security Service of Ukraine) announced it had uncovered a Russian plot to assassinate President Volodymyr Zelenskyy. The news sent the safe-haven US dollar higher in forex trading this morning.


The Philippines said its manufacturing production declined 1.7% year-over-year in March, versus a 5.7% gain in the prior month, exerting pressure on the PHP/USD forex pair.


The American Petroleum Institute said that US crude oil stockpiled had risen by 0.509 million barrels in the week ending May 3, compared to a gain of 4.906 million barrels in the prior week, which sent the WTI crude oil prices lower this morning.


Mexico’s consumer confidence indicator came in unchanged at 47.3 in April, exerting pressure on the MXN/USD forex pair.


Canada’s Ivey Purchasing Managers Index rose to 63 in April, from 57.5 in the prior month. However, the CAD/USD pair fell in forex trading this morning.

What else to watch today

Germany’s industrial production, South Africa’s foreign exchange reserves, France’s foreign exchange reserves, European Central Bank’s non-monetary policy meeting, Spain’s industrial output, Italy’s retail sales, Russia’s Foreign exchange reserves and monetary policy report, US MBA mortgage applications, wholesale inventories, crude oil inventories, gasoline inventories, and distillate inventories, Brazil’s retail sales, balance of trade, new vehicle registrations and car production,  Turkey’s treasury cash balance, Indonesia’s motorbike sales, as well as Argentina’s industrial production.


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