It’s been almost a year since Bob Iger made his surprise return to
Disney,
and investors may finally have cause for optimism.
There’s still a long way to go—Iger recently extended his cameo at the helm by another two years through 2026. It’s a sign of how much more work there is to be done.
But there has undoubtedly been progress. Losses in the media and entertainment giant’s streaming business—a top priority for the company—narrowed significantly in its fiscal fourth quarter and
Disney
+ added 7 million subscribers. The ad-supported tier added 2 million, which should be considered a success. Profitability this time next year remains the target.
The end of the actors’ strike early Thursday is another positive for Disney, and means the industry’s content machine can begin whirring again.
Iger was eager to stress that Disney could now move beyond the period of fixing, and begin building the business again.
That’s bold, and likely a bit premature—there’s still plenty to be fixed. Not least, sorting out the future of ESPN and its transition to streaming-only by 2025. Revenue from traditional TV networks, excluding ESPN, is an area of concern, falling 9% in the quarter.
Its box office performance could also do with a bit of magic, following a series of disappointing Marvel movies. At the same time it’s trying to find a further $2 billion in cost savings.
Investors who hoped that Iger’s comeback would bring about a dramatic change in the stock’s fortunes have had their patience tested over the past year. The stock jumped 6% the day after the CEO’s unexpected return was announced in November last year, but has fallen 13% since, as of Wednesday’s close.
—Callum Keown
*** Join Barron’s senior managing editor Lauren R. Rublin and healthcare industry reporter Josh Nathan-Kazis today at noon when they discuss recent developments in biotech, pharma, and other segments of the healthcare market, and the outlook for healthcare companies and stocks. Sign up here.
***
Extra $2 Billion Cost Cuts Sought After Earnings Beat
Walt Disney
beat expectations for fourth-quarter earnings and said it would go after another $2 billion in cost savings. Its results got a boost from a narrower-than-expected loss in streaming and a jump in revenue from its theme parks. CEO Bob Iger said the quarter’s progress will help it move beyond a “period of fixing.”
- Disney’s sales rose 5% to $21.2 billion for the quarter, slightly below Wall Street predictions. Adjusted profit was 82 cents a share. Activist investor Nelson Peltz has threatened a proxy fight, though he dropped an earlier campaign this year after Disney announced expense cuts.
- Disney’s streaming business, which includes Hulu and ESPN+ and has been losing money since Disney+ launched in late 2019, narrowed its losses to $387 million in the quarter, from $1.47 billion a year earlier. Disney expects its streaming business to break even by September 2024.
- Disney+ added 6.9 million “core” subscribers in North America, Europe, and Asia excluding India, more than double what analysts predicted, ending the quarter with 150.2 million global subscribers. Disney+ added 500,000 domestic subscribers, who pay an average of $7.50 a month.
- Operating income at Disney’s Experiences segment, which includes theme parks, cruise ships, a family-adventure travel-guide business, and merchandise licensing, rose 31% from the same quarter last year—to $1.76 billion. Disney has increased theme park prices and invested more in its cruises.
What’s Next: Disney also announced a more ambitious cost-cutting plan and raised its annualized cost efficiencies target to $7.5 billion, from the $5.5 billion set at the beginning of the year. Analysts estimate December-quarter revenue of $24.2 billion, with profit of $1.15 a share.
—Janet H. Cho and Eric J. Savitz
***
China’s Consumer Prices Fall Again, Dragged Down by Pork
Economic data out of China showed consumer prices are falling from a year ago. It’s a bad sign as the world’s second-biggest economy tries to revive itself after the Covid-19 slump.
- The consumer price index dropped 0.2% from a year earlier in October. It’s a new month of negative inflation—not quite deflation—but some might call it that as a shorthand. Economists usually define deflation as a prolonged period of consumer prices and asset values, which is widely damaging.
- Deflation is “a very pernicious situation” that “leads to a sharp slowdown in economic activity,” said ING analyst Robert Carnell. “What China has right now is a low rate of underlying inflation, which reflects the fact that domestic demand is fairly weak.”
- A dip in food prices, particularly a 30% annual drop in the cost of pork, was the main driver pushing down inflation last month. It’s the second negative reading since July, and prices stagnated in June and September.
What’s Next: The fear is that China could fall into a repeat of Japan’s experience of deflation for decades starting in the 1990s. But given China’s size—it has 1.4 billion people—and the amount of catch-up it still has to do to match wealth levels of advanced economies, that seems unlikely.
—Brian Swint
***
Eli Lilly Enters Weight-Loss Drug Race After FDA Approval
Eli Lilly
officially entered the weight-loss drug race after the Food and Drug Administration approved its hotly anticipated competitor to
Novo Nordisk’s
Wegovy. Lilly’s Mounjaro, a Type 2 diabetes medication that has been used off-label for weight loss until now, will be branded Zepbound for that market.
-
Lilly and Novo aren’t the only pharmaceutical makers racing to get a piece of what is expected to be a lucrative market.
Pfizer
will unveil new data on its twice-daily weight-loss pill by the end of 2023. Lilly and Novo are also developing oral weight loss drugs. - The FDA approved Lilly’s Zepbound for adults with obesity, or who are overweight and have at least one other condition such as high blood pressure or high cholesterol. Patients without diabetes in one trial lost 18% of their body weight after taking Zepbound for 72 weeks, the FDA said.
- The list price for the once-weekly injection will be about $1,060 a month, Lilly said. The company plans to offer a savings-card program so people with insurance could get Zepbound for as little as $25 for a one-month prescription.
- Lilly and Novo have struggled with high demand and supply shortages of their weight-loss injectables, but the drugs have become a cultural phenomenon. In October, Citigroup analyst Andrew Baum wrote that he expects peak sales of $22 billion for Mounjaro and $37 billion for Zepbound.
What’s Next: Lilly said it wants to persuade government and private insurance plans to cover Zepbound. Annual global sales of diabetes and obesity treatments are expected to reach $11.8 billion in 2025, up from an expected $4.5 billion this year, according to FactSet.
—Josh Nathan-Kazis and Janet H. Cho
***
Warner Bros. Discovery’s Advertising, Subscribers Drop
At
Warner Bros. Discovery,
a drop in advertising revenue, a decline in television revenue because of the Hollywood strikes, and weak streaming subscriber numbers combined for a disappointing third-quarter earnings report. CEO David Zaslav called it a “generational disruption.”
- Warner Bros reported a loss of 17 cents a share on revenue of $9.98 billion. Television revenue fell 22%, advertising revenue fell 12%, and global streaming subscribers dropped 700,000, to 95.1 million. It started Max, its streaming platform combining HBO and Discovery+ content, in May.
- Zaslav told analysts that subscriber numbers to its Max service were dented after “one of our lightest original-content schedules in years.” The Hollywood writers and actors strikes forced it to postpone the release of certain films and television shows. Actors reached a tentative agreement with studios late Wednesday.
-
Separately,
AMC Entertainment,
the movie-theater chain boosted by the summer blockbuster movie combo known as Barbenheimer (Barbie and Oppenheimer), reported better-than-expected profit and a narrower-than-forecast loss. Revenue rose 45% from one year ago. CEO Adam Aron acknowledged that the Hollywood strikes would pose challenges into 2024. -
Elsewhere in the sector, Liberty Media investors will hear from Chairman John Malone and CEO Greg Maffei during Liberty’s annual investor day today. Malone helped engineer the making of Warner Bros. Discovery last year as a key shareholder of Discovery, which merged with the Warner Media business that was spun out of
AT&T.
What’s Next: Liberty investors will be listening for any updates on the potential sale of the Atlanta Braves baseball team, and Liberty’s proposed deal to merge its Liberty SiriusXM and
Sirius XM Holdings.
Malone will likely also be asked about Walt Disney and its ESPN division.
—Janet H. Cho and Liz Moyer
***
New York Art Auctions Reveal Cautious Mood and Buyers
New York art auctions this week and next are expected to fetch an estimated $2.5 billion, including several headline-grabbing works, but things got off to a slow start. The sentiment, described as cautious and conservative, may indicate that even extremely affluent art collectors are selectively spending.
- An untitled work from Cy Twombly’s Bacchus series sold for $19.9 million, including fees, and a 1981 painting by Jean-Michel Basquiat sold for $11.9 million at Christie’s on Tuesday, both near the lower end of the expected sales range.
- Christie’s auction of 21st century art, with 41 works, realized about $88.4 million, not including fees, just short of the $93 million set as the low end of a presale estimated range. With fees, the sale realized about $107.5 million, with 95% of all lots sold.
- An even bigger sales event happened Wednesday. Sotheby’s auctioned a 1932 painting by Pablo Picasso from the art collection of Emily Fisher Landau for $139.4 million, with fees. The estimated sale price presale was $120 million.
- The sales are the latest in a string of fall art fairs and auctions that began in September with the New York Armory Show, then went to London with two Frieze art fairs and several auctions, and then on to Paris. Results were varied, giving an unclear reading on the art market overall.
What’s Next: Christie’s will auction three paintings by French artist Paul Cézanne today, put up for sale by Museum Langmatt in Baden, Switzerland, out of financial necessity, according to a press release by the auction house. One piece is estimated to fetch between $35 million and $55 million.
—Liz Moyer and Penta
***
There are a lot of moving parts and what-ifs that can complicate an individual’s financial situation. “Optimizing when to take the pension, thinking about how many years to work and aligning the investment portfolio with your other goals is important to ensure you’re not taking on more risk than you can afford,” says certified financial planner Josh Trubow at Sensible Financial.
MarketWatch asked some experts for tips on how to decide whether to hire a financial advisor, and if so, what type of advisor can best guide investors through these issues?
For more, read here.
—Alisa Wolfson
***
—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner
Read the full article here
