Disney (DIS) Earnings Preview: Streaming Growth and Theatrical Momentum Balance Theme Park Challenges

As Walt Disney prepares to release its fourth-quarter fiscal 2024 earnings tomorrow, investors and analysts alike are keenly focused on key areas of the company's evolving strategy. The entertainment giant, riding a 19 percent surge in share price since its last earnings report, faces a critical juncture as it balances its ambitions in streaming, theatrical releases, and traditional theme parks. The consensus estimates for earnings per share stand at $1.11, with revenues expected at $22.5 billion.

Streaming Success Steals the Spotlight

A pivotal point in Disney's trajectory this year has been its Direct-to-Consumer (DTC) Streaming segment, encompassing Disney+, Hulu, and ESPN+. After years of substantial investments and operating losses, Disney finally achieved a critical milestone in the third quarter when DTC generated its first operating profit of $47 million. This turnaround was driven by targeted price increases for Disney+ and Hulu, alongside a disciplined focus on cost efficiency.

Although price hikes have tempered subscriber growth, they have not led to the attrition that some feared. For instance, in Q3, Disney+ Core Subscribers increased modestly by 1 percent to 118.3 million, outperforming company expectations of zero growth. With further subscriber gains expected in Q4, the streaming business is on track for sustained profitability—a development likely to resonate positively with shareholders.

Theatrical Blockbusters Bolster Revenue Streams

Disney’s theatrical business has delivered robust results, with hits like "Inside Out 2" and the much-anticipated "Deadpool & Wolverine" sequel contributing significantly to the Entertainment segment. In Q3, the company reported $254 million in operating income from Content Sales and Licensing, a remarkable turnaround from the $(112) million recorded a year earlier. The strong performance of its film slate in Q4 is expected to further boost earnings, demonstrating the enduring value of Disney's intellectual property in a competitive entertainment landscape.

Domestic Theme Parks Face Challenges Amid Broader Headwinds

While streaming and theatrical performances have outshone expectations, Disney's theme park division—historically a reliable earnings driver—has experienced a slowdown. In Q3, revenue for the Experiences segment increased by just 2 percent to $8.4 billion, while operating income slipped by 3 percent to $2.2 billion. This moderation reflects macroeconomic pressures and evolving consumer preferences.

Disney has forecasted that domestic park demand will remain subdued over the next several quarters. Hurricane Milton, which temporarily shuttered Disney World in October, further compounded these challenges in Q4. However, the bright spots within the Experiences division include international theme parks and Disney’s cruise line business, which collectively represent 60 percent of the segment’s revenue and continue to show resilience.

Sports Segment Gains Traction

The company’s Sports segment, primarily anchored by ESPN, has performed steadily, benefiting from healthy advertising demand. The rising popularity of women’s sports, highlighted by the WNBA Finals reaching its highest viewership in 25 years across ESPN networks, underscores Disney's ability to capitalize on shifting audience dynamics. This trend could provide further upside as Disney continues to innovate its sports programming offerings.

CEO Succession Plan Remains in Focus

In addition to its operational updates, Disney’s leadership transition plan has drawn significant attention. CEO Bob Iger’s tenure has been extended until early 2026, granting the board additional time to identify his successor. Whether Disney opts for an internal candidate or considers external talent will likely remain a topic of discussion during the earnings call.

Outlook for Fiscal Year 2025

Investors will also be keen to hear Disney's initial guidance for fiscal year 2025. Current estimates project earnings per share of $5.17 on revenue of $95.1 billion. As Disney continues to optimize its cost structure and capitalize on growth in streaming and theatrical releases, these targets may provide an early glimpse into its potential for sustained recovery.

Conclusion

Walt Disney enters its fourth-quarter earnings report at a critical moment in its evolution, leveraging the successes of its DTC Streaming turnaround and a strong theatrical slate to counterbalance challenges in its domestic theme park business. With its stock trading near multi-month highs and growing momentum in its international and sports divisions, Disney appears well-positioned to navigate its next phase of growth. However, macroeconomic headwinds and questions around leadership succession will remain key themes for investors in the quarters ahead.