This is Walt Disney Co.’s 100th anniversary but many investors can be forgiven for wanting to skip the celebration.
Disney (NYSE: DIS) hasn’t been able to get it right in the last few years despite unbeatable assets and a global reach. But for all its woes and missteps, Disney may be worth a fresh look. The pandemic is behind it, the bad news is out, and strategic initiatives aimed at enhancing its cruise lines and resorts, particularly in Asia, are appealing.
Disney has annual revenues of $88 billion (figures in US dollars). In addition to theme parks, resorts, and cruise ships, it owns ABC TV, ESPN, and film studios such as 20th Century Fox, Pixar, and Lucasfilm. Its film library is a rich source of recurring cash with such animated titles as Cinderella, The Lion King, and Shrek. Its all-time greatest hit is Snow White and the Seven Dwarfs, which was released in 1937. Adjusted for inflation the film made $1.9 billion through 2022.
It doesn’t get any better than that, but each Disney unit has faced different challenges over the past few years, some of which were brewing pre-pandemic.
The pandemic forced Disney to shift gears so it poured resources into the Disney+ streaming service which was launched in the fall of 2019. With lockdowns keeping people at home, subscriptions boomed. That optimism carried Disney shares to a high of $197 in early 2021. They have fallen back to earth since then, hitting a nine-year low in August before rebounding to the recent price of $95. Â
Disney’s fourth quarter and 2023 year end results were released on Nov. 9 and beat estimates. Revenue in the three months ended Sept. 30 grew 5.4% to $21.2 billion. Earnings of $0.82 a share exceeded estimates.
Theme parks delivered the best performance. Revenue for the unit which includes the parks and Disney merchandise grew 12% to $8.2 billion, led by 55% growth at international venues.
While streaming services continue to lose money, the gap is narrowing. These operations, which include Disney+, ESPN+, and HULU, have collectively lost $11 billion since 2019. Cost cutting and streamlined production schedules have closed the gap considerably. The unit’s loss narrowed to $387 million in the latest quarter, better than expected. The company aims to turn a profit in that part of the business by the end of this fiscal year. Part of the good news is that Disney+ paying subscribers topped 150 million after several quarters of decline.
Disney’s traditional TV holdings, which include ABC, National Geographic, and FX continue to be weak as viewers and advertisers shift to streaming services. Disney has indicated it is open to selling those operations, as well as seeking a partner to accelerate the ESPN sports network’s transition to streaming.
CEO Bob Iger cut 7,000 jobs this year and in the spring set a target of $5.5 billion in cost savings for the year. Under pressure from activist shareholder Nelson Peltz Iger, he has upped that target to $7.5 billion.
Last, but not least, Disney suspended its dividend in May 2020. It says it will restore a modest payment in the coming year. Its confidence comes from rising free cash flow, which would pay for the dividend. It has been steadily improving and for the full 2023 fiscal it rose to $4.9 billion versus $1 billion in 2022.
All of it adds up to the early stages of a turnaround. The company has more than 235 million subscribers across all its streaming services, which surpasses Netflix. The pandemic damage has been done. Cruise line and theme park revenues are rising, and financial controls are containing costs.
Disney is intensifying a focus on Asia with an expansion to its theme park, resort, and cruise line businesses. They account for about 80% of overall profit, despite generating just 33% of total revenue.
As part of that, Disney cruise ships will visit Australia and New Zealand this year for the first time. Over the next two years, it is doubling the capacity of its cruise line, adding two ships in 2025 and another in 2026.
A new cruise ship hub in Singapore will feed growth in the Asia-Pacific region. The investments are part of a 10-year plan to invest $60 billion to expand its theme parks and cruise line business.
Disney’s is a powerful global brand in the Top 50 of the Fortune 500 list. In any market, language, or currency, the family-friendly fare resonates. For investors that’s worth celebrating.
This article appeared in the Internet Wealth Builder on Nov. 20, 2023. For information on how to reprint this article please view this page.
Adam Mayers 
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