Disney (DIS) will report its fiscal third quarter earnings before the bell on Wednesday as the company attempts to reach sustainable profitability in its streaming division and also stabilize demand within its parks business.
Disney recently adjusted its reporting structure after CEO Bob Iger reorganized the company into three core business segments: Disney Entertainment, which includes its entire media and streaming portfolio; Experiences, which encompasses the parks business; and Sports, which includes ESPN networks and ESPN+.
Over the past year, Disney has been grappling with challenges that include a declining linear TV business, slower growth in its parks business, and profitability hurdles in streaming.
Disney CEO Bob Iger has attempted to reset the company with anaggressive turnaround plan and recently emerged victorious from a high-profile proxy fight against activist investor Nelson Peltz. But investors have been cautious of late, with shares reversing prior gains to fall more than 20% over the last three months.
Here's how Wall Street expects Disney to perform, according to consensus estimates compiled by Bloomberg:
Total revenue: $23.08 billion versus $22.33 billion in Q3 2023
Adj. earnings per share: $1.19 versus $1.03 in Q3 2023
Entertainment revenue: $10.37 billion
Sports revenue: $4.40 billion
Experiences revenue: $8.61 billion
Disney+ subscriber: 154.55 million versus 146.10 million in Q3 2023
Streaming price hikes
Guidance will be closely watched afterlast quarter's disappointing forecast led to concerns over the company's long-term outlook.
In May, Disney said an important part of its streaming business turned a profit for the first time but that it expects weaker results in that segment for the third quarter, highlighting the challenges in achieving sustainable streaming profitability, a key priority as its linear TV business declines.
On Tuesday, the company announced price hikes will once again hit its various streaming services. The monthly cost of the Disney+ ad tier will rise by $2 to $9.99, while the ad-free version will also tick up by $2 to hit $15.99.
Similarly, Hulu's ad-supported tier will rise by $2 to $9.99 per month, with the ad-free version rising by $1 to $18.99. The Disney Bundle will offer ad tiers of Disney+ and Hulu for $10.99 per month, up $1 from its previous price and an overall more attractive offering compared to the individual plans.
The price changes, among others announced, are set to go into effect on Oct. 17. Disney expects full streaming profitability by the fourth quarter of this year.
"A faster track to significant earnings would be a plus for the direct to consumer segment," CFRA analyst Ken Leon wrote in a note ahead of the earnings release.
Leon added the company's renewed deal with the NBA will also be top of mind for investors, particularly when it comes to how much Disney is willing to spend on expensive sports rights.
Outside of the NBA, the company will debut a new sports streaming platformwith Fox (FOXA) and Warner Bros. Discovery (WBD) sometime this fall at a price point of $42.99 a month. It's also working on a separate sports streaming platform for ESPN, set to debutin fall 2025.
Parks shaky, bright spots in theatrical
Parks remain another area of concern after the company said third quarter operating income for the segment should be "roughly comparable to the prior year."
At the time, Disney CFO Hugh Johnston said the company has seen "some evidence of a global moderation from peak post-COVID travel" at its theme parks. He also noted rising costs and inflation will likely register a hit to profits.
In a note to clients last month, KeyBanc analyst Brandon Nispel said attendance at Disney's theme parks was only up one out of 30 days year over year in June, citing internal domestic geolocation data.
"Looking forward, we'd expect continued softness, which could lead to deceleration or potentially declines in revenue for domestic parks," the analyst said.
Bloomberg Intelligence analyst Geetha Ranganathan agreed the demand outlook will likely weigh on results but that any weakness should be "temporary given a $60 billion investment commitment as well as the launch of new cruises in fiscal 2025-2026 which will double capacity."
In one bright spot, Disney's theatrical power seems to be back on track with strong showings from films like "Inside Out 2" and the more recent "Deadpool & Wolverine." It's also on pace to lead the box office in the back half of this year with the upcoming releases of "Moana 2" and "Mufasa: The Lion King."
But analysts say the focus will remain on parks and streaming.
"While we think [Disney's theatrical comeback] is nice incremental revenue and operating income, theatrical results are hardly the driver of profitability that they used to be," Nispel said.
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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