Disney Sets Positive Long-Term Guidance

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By Brian Nelson, CFA

Disney (DIS) reported better than expected fiscal fourth quarter results on November 15. Revenue increased 6% in the fiscal fourth quarter, while the company achieved strong 23% expansion in total segment operating income. Diluted earnings per share excluding certain items expanded to $1.14 in the quarter, up 39% from the same period a year ago. Cash flow from operations advanced to $5.5 billion, up 15% year-over-year, while free cash flow came in at $4 billion in the quarter, up 18% year-over-year.

Management had the following to say about the quarter and full fiscal year results:

This was a pivotal and successful year for The Walt Disney Company, and thanks to the significant progress we’ve made, we have emerged from a period of considerable challenges and disruption well positioned for growth and optimistic about our future. Our solid performance in the fiscal fourth quarter reflected the success of our strategic efforts to improve quality, innovation, efficiency, and value creation. In Q4 we saw one of the best quarters in the history of our film studio, improved profitability in our streaming businesses, a record-breaking 60 Emmy Awards for the company, the continued power of live sports, and the unveiling of an impressive collection of new projects coming to our Experiences segment. As a result of our strategies and our focus on managing our businesses for both the near- and long-term, we are differentiating ourselves from traditional competitors, leveraging the deepest and broadest set of entertainment assets in the industry to drive attractive returns and further advance our goals.

Revenue in its Entertainment segment advanced 14%, while segment operating income increased to $1.07 billion from $236 million in the year-ago period. Sports revenue was roughly flat, while segment operating income declined 5%. Experiences revenue increased a modest 1% in the quarter, with segment operating income falling 6%. Entertainment DTC showcased 14% ad revenue growth in the fourth quarter, and the firm ended the quarter with 174+ million Disney+ Core and Hulu subscriptions. Pixar’s Inside Out 2 and Marvel’s Deadpool and Wolverine contributed favorably to operating income, breaking numerous box office records along the way.

Looking to guidance, Disney expects high-single digit adjusted earnings per share growth in fiscal 2025, roughly $15 billion in cash flow from operations and approximately $8 billion in capital spending, translating into $7 billion in traditional free cash flow. The entertainment giant expects dividend growth to track earnings expansion, while it plans to buy back $3 billion in stock repurchases during the year. For 2026, the company expects double-digit adjusted earnings per share growth and double-digit growth in cash provided by operations. For 2027, management expects double-digit adjusted earnings per share growth. The high end of our fair value estimate range for Disney stands at $120.

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