Shares in Walt Disney (DIS:NYSE) were up over 2% at $87 in after-hours trading despite third quarter earnings missing analysts’ expectations.

For the third quarter ending 1 July 2023, the entertainment giant reported a 4% increase in revenue to $22.3 billion compared to $21.5 billion in the same year-ago period.

Earnings per share (EPS) fell to $1.14 from $1.66 in the same year-ago period.

Revenue for Disney’s linear TV networks fell by 7% to $6.7 billion and operating income fell 23% to $1.9 billion.

CEO Bob Iger said however the $158 billion group was ‘on track to exceed its initial goal of $5.5 billion in savings as well as improved our direct-to-consumer operating income by roughly $1 billion in just three quarters.’

IMPROVEMENT AT DISNEY +

The entertainment giant reported a 9% increase in its direct-to-consumer revenues and a fall in an operating loss to $500 million (from a loss of $1.1 billion).

This fall in operating loss was due to a lower loss at Disney+, higher operating income at Hulu and a lower loss at ESPN+.

However subscriber numbers fell and were short of expectations. Disney outlined plans to crack down on password sharing for Disney+ and to lift subscription prices across the board.

Revenues for Disney Parks and Experiences were up 13% for the quarter to $8.3 billion and segment operating income increased 11% to $2.4 billion partially due to growth at its international parks and resorts in Shanghai and Hong Kong.

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EXPERT VIEW

Russ Mould, investment director at AJ Bell said: ‘Bob Iger is not walking off into the sunset with his work at the House of Mouse done anytime soon.

‘Having re-joined to fix an ailing business, it is undoubtedly proving trickier than first thought and the extension to his contract by two years out to 2026 was both reassuring but also an admission of an extended timeline for the turnaround. An actors’ strike is just another wrinkle for Iger to deal with.

‘Disney is following in the footsteps of Netflix by cracking down on password sharing and increasing subscription fees. This seems to have worked out for its streaming rival which doesn’t have the same wealth of content as Disney.

‘In terms of future content, the strategy seems to be shifting to fewer but higher quality releases, which is important if the company is not going to dilute the appeal of its key brands.’

DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Tom Sieber) own shares in AJ Bell.

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