Walt Disney shares soared after the company reported better-than-expected fiscal fourth-quarter earnings on Thursday and surprised analysts with profit guidance for the next three fiscal years. Adjusted earnings rose to $1.14 per diluted share from $0.82 a year earlier, topping the consensus estimate of $1.11 from analysts surveyed by Capital IQ.
Revenue climbed to $22.57 billion from $21.24 billion, exceeding the $22.49 billion consensus. In fiscal 2025, the company expects high single-digit adjusted EPS growth and double-digit growth in fiscal 2026 and 2027. "That was a real surprise," Argus Research analyst Joseph Bonner said in an interview with MT Newswires.
"I've covered them for a long time, and they barely ever give any kind of guidance." Huber Research analyst Douglas Arthur said he was "shocked" by Disney's outlook, and while light on specifics, the guidance reflects the company's belief in the strength of profitable units and the resiliency of weaker segments. "It's a vote of confidence in [theme] parks getting better, streaming profitability accelerating significantly, the decline in linear [networks] being manageable, sports doing what it's going to do and content being up and down with each box office result," Arthur said.
"I've never seen it before, and I think the stock reacted to that." Disney shares rose 3.4% in recent trading Friday after jumping 6.2% on Thursday. Streaming was a catalyst in the latest fiscal quarter and is expected to continue driving growth, analysts said. Disney's combined direct to consumer streaming, which includes Disney+, Hulu and ESPN+, booked operating income of $321 million, up from a loss of $387 million a year earlier.
The media giant ended the quarter with 174 million Disney+ core and Hulu subscriptions and more than 120 million Disney+ core paid subscribers, up 4.4 million from the previous quarter. "As far as streaming goes, it was an impressive quarter for subscription additions," Morningstar analyst Matthew Dolgin said.
"It's a more volatile metric. I'm not reading through that they're going to add 5 million subs [next quarter]. It was just a really solid quarter. "The bigger thing I read through is profitability," Dolgin said. "It was really good, and it seems like it is going to keep building at an accelerating rate.
That was probably the single most encouraging thing." Strength in streaming helped counter another poor quarter for linear networks with Disney's cable and broadcast television programming. Linear network revenue fell 6% to $2.46 billion from a year earlier, while operating income dropped 38% to $498 million.
Linear networks booked declines in revenue and operating income in every quarter in fiscal 2024 as consumers increasingly "cut the cord" on cable, and there doesn't appear to be an end in sight, Dolgin said. "I don't think those problems are going anywhere," he said. "Linear, in and of itself, is bound for perpetual decline, and I don't expect it to get significantly better ever." On a conference call with analysts Thursday, Disney executives provided a defense for sticking with linear, versus a spinoff strategy planned by Comcast for its cable networks. "Linear provides a differentiated audience than streaming," Chief Executive Officer Bob Iger said.
"And the way we integrate those businesses, not just from a programming perspective or technology perspective, but from an advertising perspective, gives us some interesting leverage in the business and enables us to offer advertisers a much broader, even deeper offering in terms of avails." Disney's experiences segment, which includes theme parks and cruises, was expected to be affected adversely by a number of transitory events but mostly matched or surpassed expectations. Parks and experiences booked $8.24 billion in fiscal Q4 revenue, up 1% from a year earlier, with $1.66 billion in operating income, down 6%.
Domestically, Disney weathered two hurricanes to book 3% revenue growth to $5.52 billion and 5% operating income growth to $847 million. Internationally, executives said the Paris Olympics and some "consumer softness in Shanghai" led to a 5% drop in revenue to $1.58 billion and a 32% drop in operating income to $299 million. The company guided for 6% to 8% segment growth in fiscal 2025, weighted to the back half of the year. "Q1 will be negatively impacted, of course, by the combination of the two hurricanes, as well as the prelaunch cost for the Treasure [cruise line]," Chief Financial Officer Hugh Johnston said on the call.
"As we move through the course of the year, we'll move to positive in Q2 and then see further strengthening." Argus' Bonner said that unlike linear, parks will remain a driver of profitability, albeit not the most significant one. "Parks are always going to be very important," he said. "It's more of a steady-state kind of growth.
I'm not expecting double-digit growth. It's more of a single-digit growth story. It is a good business. It gives diversification. It's all good, but the real growth story is in the streaming.".