Share prices of Walt Disney(NYSE: DIS) jumped following its fiscal 2024 fourth-quarter earnings release on Nov. 14 after the entertainment company reported strong streaming growth and issued upbeat guidance. After a tough stretch for the past few years, Disney stock has rebounded in 2024 and is now up nearly 24% for the year as of this writing.
Let's take a close look at the company's fiscal fourth-quarter results and see if now is a good opportunity to buy the stock.
Streaming strength helps Disney
One of Disney's most-watched business segments right now is its streaming services (a division of the Entertainment segment), which consist of Disney+ and Hulu. Disney's linear TV networks have been in decline, so streaming has been taking on a more important role.
For its streaming services, Disney focuses more on profitability these days, and on that front, the company was successful, flipping to a positive operating income of $321 million for the quarter (which ended Sept. 28). Q4 marked a turning point for the streaming business as it generated a loss of $387 million in fiscal 2023's fourth quarter and a $1.5 billion quarterly loss in Q4 fiscal 2022.
The company continued to nicely grow its subscriber bases, with Disney+ subscribers up nearly 10% year over year and Hulu subs increasing nearly 4%. It also benefited from increased subscription pricing and higher ad revenue.
Total entertainment segment revenue jumped 14% year over year to $10.8 billion. In addition to the strong showing in its streaming businesses, the growth was helped by the performance of Inside Out 2 and Deadpool & Wolverine at the box office. The former was the highest-grossing animated movie of all time, while the latter was the highest-grossing R-rated movie of all time.
Overall revenue for Disney rose 6% to $22.57 billion, just ahead of the $22.45 billion that analysts were estimating. Sports segment revenue, which includes ESPN, was flat, while Experience segment revenue, which includes its theme parks, edged up 1% year over year. Adjusted earnings per share (EPS) jumped 39% to $1.14, coming in above the $1.10 consensus.
Here's a breakdown of Disney's most recent quarterly performance by segment:
| Segment | Q4 Revenue | Change (YOY) | Q4 Operating Income | Change (YOY) |
|---|---|---|---|---|
| Entertainment | $10.8 billion | 14% | $1.07 billion | 352% |
| -- Linear networks | $2.5 billion | (6%) | $498 million | (38%) |
| -- Direct-to-consumer | $5.8 billion | 15% | $253 million | n/m |
| -- Content sales/licensing | $2.6 billion | 39% | $316 million | n/m |
| Experiences | $8.2 billion | 1% | $1.76 billion | (6%) |
| Sports | $3.9 billion | 0% | $929 million | (5%) |
| Overall | $22.6 billion | 6% | $3.7 billion | 23% |
Data source: Disney. n/m = Not meaningful.
Disney management said it believes that its upcoming content pipeline will help drive growth in the coming years. It pointed to the upcoming box office releases of Captain America: Brave New World, a live-action Lilo & Stitch, The Fantastic Four: First Steps, and Avatar: Fire and Ash as being able to drive value not just in theaters, but across streaming and other parts of its platform as well.
The company is also optimistic about the upcoming launch of its ESPN flagship streaming service next fall. It said the new service will be an interactive and personalized experience that will be much more than just streaming ESPN. The company has also begun to integrate ESPN more with Disney+, with an ESPN tile on Disney+ being added next month.
For fiscal 2025, the company expects high-single-digit adjusted EPS growth, with double-digit operating income growth in its entertainment segment. For fiscal 2026 and 2027, it projects adjusted EPS to accelerate to double-digit growth in both periods.
Image source: Getty Images.
Is it time to buy Disney stock?
Disney has seen a big inflection in its streaming business in the past few quarters, with the segment now generating solid profits. While the linear business continues to see pressures, the shift to profitability in streaming should help alleviate some investor concerns. At the same time, its forthcoming ESPN flagship streaming service has the potential to be its next big growth driver.
Disney currently trades at a forward price-to-earnings (P/E) ratio of under 21, based on current fiscal year analyst estimates, which is below its historical P/E levels from past years.
DIS PE Ratio (Forward) data by YCharts
There has been some worry about its linear TV networks and where ESPN's high carriage fees could head in a cable TV landscape where customers are still cutting the cord, but the company looks to be in a good spot with its streaming service turning positive and a new ESPN streaming experience debuting next year. Meanwhile, it also has growth drivers as it builds out new attractions with its theme parks and cruise ships.
Given its attractive valuation and growth drivers, Disney stock looks like a solid option to consider buying at current levels.
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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool has a disclosure policy.
