Disney chairman and chief executive officer Bob Chapek might finally be catching a break going into Wednesday’s third-quarter earnings report after a year of massive miscalculations and dreadful decisions.
As a refresher, he enraged the LGBTQ community with a botched response to Florida’s “Don’t Say Gay” law, betraying queer employees and fans. He pissed off “Black Widow” star Scarlett Johansson in an embarrassing public legal battle over releasing the Marvel film. He stunned Hollywood by unceremoniously sacking TV honcho Peter Rice. And don’t even start with Abigail Disney — you know, the granddaughter of the studio’s co-founder with the same last name. She’s none-too-pleased Chapek is getting a $32.5 million paycheck in a year where everything seemed bungled.
Chapek’s damage control needed damage control.
And he might just be handed a golden opportunity to clean the slate when the world’s largest entertainment conglomerate reports earnings in just a matter of hours. Expectations are the numbers will look good, and Wall Street and Hollywood are praying the embattled CEO’s finally found his mojo.
“He has one job on Wednesday and that’s to make investors feel like he actually wants the job, and demonstrates that he’s got his confidence back,” said one money manager who has investments in Disney. “Bob was basically the easiest CEO to dump on, and, for the most part, he deserved it.”
Chapek is expected to report strong results driven by a resurgence of theme park attendance (which leans into this strength as its former chairman of Disney Parks, Experiences and Products) and the continued growth of streaming subscribers. And he’ll be able to point out the diversity of Disney’s business mix fortified the company as an uneven economy slammed into rivals like Netflix and Warner Bros. Discovery.
Wall Street has already begun placing bets that Chapek, armed with a new three-year contract, will finally get into the kind of groove investors have been waiting for since he became CEO in February 2020. Investors sent shares up 16% in just the past month, helping breathe new life into a stock that was once the Dow Jones industrial’s worst performing component.
This may very well be the defining moment for Chapek as he leads a storied company that turns 100 next year, according to analysts and insiders. But, more importantly, it’s an opportunity for Chapek to demonstrate he’s the right person to run a modern media company — and that will win over investors who haven’t exactly been thrilled he’s in the corner office.
The stock traded at nearly $200 in March 2021 and then nosedived to a low of $90.23 in the months that followed. In just the past week, the stock has finally rallied to about the $100 level as investors priced in potential bad news out of Disney’s earnings and through money behind whispers that the company will deliver a blowout quarter.
“Reports of strong guest levels across Disney’s theme parks along with continued momentum in streaming services can open the door for an earnings beat,” said BOOX Research analyst Daniel Victor. “The potential that Disney can brush aside concerns of a slowdown in consumer spending and broader economic weakness may be enough to kickstart a new rally in the stock.”
Wall Street projects Disney will report earnings of $1 a share for the three-month period ended June 30, that’s a nearly 45% increase from the year-ago period. Analysts also expect the company will deliver a 21% jump in revenue to $20.5 billion. Analysts at Bloomberg also project Disney+ will add 10 million new subscribers during the quarter.
For comparison, Warner Bros. Discovery Inc. reported last week a second-quarter loss of $3.42 billion, or $1.50 a share, on revenue of $10.82 billion. In May, Disney reported strong earnings and sales growth. Adjusted profit rose 37% from the year-ago quarter to $1.08 a share, while revenue jumped 23% to $19.2 billion.
Disney Chief Financial Officer Christine McCarthy warned during a call with analysts last quarter that consumers returned to theme parks at such an unexpectedly high rate after COVID-19 reopenings that the company had to adjust projections lower for the back half of the year. She also cited macroeconomic conditions in which high inflation and fears of a recession could crimp consumer spending, though rivals like Comcast reported revenue at its Universal theme parks increased 65% year-over-year.
Meanwhile, investors will be laser focused on Disney’s direct-to-consumer business where Disney+ will likely benefit from a robust slate of new content like “Obi-Wan Kenobi” that lured new customers. Bigger rival Netflix said last month that it lost nearly a million subscribers during the quarter. In its second quarter, Disney added a greater-than-expected 7.9 million subscribers and projected total subscribers of between 230 million to 260 million by fiscal 2024.
In addition, there is still the lingering question of whether Disney will buy out Comcast’s 33% stake in Hulu (or, if Comcast might want to buy the streamer to beef up its flailing Peacock platform). Either way, many analysts have changed their tune that Disney+ is growing at such a high rate that the company might not need to even count on Hulu’s 46 million paying subscriber base.
“At Disney+, while we still expect higher net adds in the second half of the year versus the first half, it’s worth mentioning that we did have a stronger-than-expected first half of the year,” McCarthy told investors.
Wall Street and Hollywood will find out if she’s right when Disney releases their financial numbers this afternoon and Chapek leads the company’s call with investors.
