US Stock Futures Rise as Markets Look to Continue Rebound
US stock futures are on the rise today, indicating a positive start for the markets as they aim to continue their rebound. Among the notable movers is Disney, which has significantly raised its full-year adjusted earnings growth guidance.
Disney Raises Guidance Amid Mixed Results
Disney has increased its guidance for full-year adjusted earnings growth to 30%, up from the previous 25%. This announcement comes on the back of its fiscal third-quarter report, which included a first-ever profit for its total streaming division. However, the company did face some challenges in its parks division.
Streaming Division Turns Profitable
Disney's direct-to-consumer (DTC) streaming business, encompassing Disney+, Hulu, and ESPN+, reported an operating income of $47 million. This is a remarkable turnaround from a loss of $512 million in the prior-year period. The company had anticipated achieving streaming profitability by the current quarter, and they have met this milestone ahead of schedule.
Overall, Disney's Q3 adjusted earnings came in at $1.39 per share, surpassing the $1.19 analysts had expected and considerably higher than the $1.03 reported in the same period last year. Additionally, revenue reached $23.2 billion, exceeding the consensus expectation of $23.1 billion and higher than the $22.3 billion from a year ago.
Parks Division Faces Challenges
Despite the positive news from the streaming division, Disney's parks division showed some weakness. Domestic operating income fell by 6% from the previous year, landing at $1.35 billion. The company cited a "moderation of consumer demand," which could continue over the next few quarters. Disneyland Paris is anticipated to experience reduced demand due to the Olympics and some cyclical softening in China. However, Disney sees continued strong demand for its cruises.
Price Hikes and Future Outlook
Looking ahead, Disney remains optimistic about its path toward streaming profitability, particularly in the fourth quarter. Both DTC entertainment, which posted a small loss of $19 million in Q3, and ESPN+ are expected to be profitable. One of the strategies to improve margins includes new price hikes. On Tuesday, Disney announced that prices for Disney+ and Hulu would increase, with these changes taking effect in October.
"We continue to feel optimistic about our trajectory, with multiple building blocks for improving margins over the coming years," the company said in its release.
Market Reaction
Disney's stock rose by as much as 3% in premarket trading on Wednesday but eventually forfeited these gains. As of now, Disney's stock remains roughly unchanged for the year.
In summary, while Disney faces some headwinds in its parks division, the company's robust performance in streaming and optimistic future projections have helped lift its overall outlook. Investors will be watching closely to see how the price hikes and other strategic moves impact Disney's financials in the coming quarters.
