The Walt Disney Company in its earnings call reported a modest 2% revenue growth in the Q3 of 2024, with strong demand for its theme parks, though attendance was flat. The company anticipates a flattish revenue in the Q4 and expects the demand for parks to slow down for a few quarters.
Walt Disney predicted a ‘moderation in demand’ at its theme park business in coming quarters, overshadowing the success of the animated Pixar film “Inside Out 2” and the company’s television business. Disney’s stock was down 1.1% Wednesday as Disney warned operating income at the parks would be down ‘mid single-digits’ in the fiscal Q4.
Disney’s earnings report
“We expect to see a flattish revenue number in Q4 coming out of the parks,” Chief Financial Officer Hugh Johnston told investors, adding, “It’s really just a few quarters. I don’t think I would refer to it as protracted.”
Analysts said weakness at Disney’s parks, coming at a time when consumer spending has been pinched by inflation, underscores worries about the slowing U.S. economy.
“Coupled with other travel companies recognizing poor growth, it is clear people are scaling back their spend when it comes to tourism and recreation,” said Ben Barringer, technology and media analyst at Quilter Cheviot.
Disney’s operating income
Operating income nearly tripled at its Entertainment unit, with the combined streaming businesses of Disney+, Hulu and ESPN+ posting a profit for the first time.
Operating income for the unit is likely to fall by “mid single digits” in the July-September quarter compared with the same period a year prior, Disney said.
Adjusted earnings-per-share reached $1.39 for Disney’s fiscal Q3, topping analyst estimates of $1.19, LSEG data showed.
Disney’s revenue rose 4% to $23.2 billion, beating forecasts of $23.1 billion.
Disney entertainment division’s resurgence
Chief Executive Bob Iger told investors the company’s streaming business is driven by the creative success of its entertainment division, with Disney’s television group collecting a total 183 Emmy nominations. The box office success of films like “Inside Out 2” also prompted a surge in viewing of the original film on Disney+.
“We’re seeing growth in consumption, on top of the popularity of our offering,” Iger said. “Which gives us the pricing leverage that we believe we have. So every time we’ve taken a price increase, we’ve got a modest turn from that.”
Iger is working to rebuild Disney after billions of dollars in losses from streaming efforts, the decline of traditional television and a rough patch for its storied film studio.
The Entertainment division, which includes the film, television and streaming businesses, reported operating income of $1.2 billion in the quarter. The Disney+, Hulu and ESPN+ streaming services produced operating profit of $47 million.
Disney’s theme park profit
Disney’s experiences segment that includes parks and consumer products makes up just over half of profit, recorded an operating income drop of 3%. The experiences unit reported operating income of $2.2 billion. Disney said there was a “moderation” in demand at its domestic parks, whose operating income were also impacted by higher costs, increased spending on technology and new consumer offerings. It saw increases in attendance and higher spending at its international parks, where it also reported an increase in cost associated with new offerings.
The coming quarter will be affected by the Olympics, which depressed attendance at Disneyland Paris, and some “softening” of business in China.
Walt Disney Company outlook
Disney has shown resilience in its theme park sector and is making strategic moves to bolster its Disney+ streaming service with newer content and technological advancements. No doubt it is facing potential short-term challenges in theme park profit due to attendance, the company’s focus on its experiences business and direct-to-consumer segment suggests confidence in future growth prospects.
