Is it time to buy Disney stock?
Walt Disney (NYSE:DIS) stock was on the move Wednesday, rising 10% after the media and entertainment leader reported excellent second quarter earnings results and a promising outlook for 2025.
Revenue increased 7% year-over-year to 423.6 billion, which surpassed estimates of $23.1 billion.
Operating income soared 15% to $4.4 billion, while earnings jumped to $1.81 per share, up rom a 1 cent per share net loss in Q2 of 2024. That wide discrepancy was related in large part to a one-time goodwill impairment charge of $2.1 billion in Q2 2024 related to its Star India property.
Adjusted earnings were $1.45 per share, up 20% year-over-year. That exceeded the $1.21 EPS that analysts had expected.
“Our outstanding performance this quarter—with adjusted EPS up 20% from the prior year driven by our Entertainment and Experiences businesses—underscores our continued success building for growth and executing across our strategic priorities,” Robert Iger, CEO, Walt Disney Company, said.
Disney’s theme parks have been the cash cow for the business over the years, and that was especially true in recent years with all the changes happening within the media business.
In the second quarter, Disney saw its domestic theme parks boost revenue by 9% year-over-year to $6.5 billion, while operating income, after expenses subtracted, rose 13% to $1.8 billion.
Theme parks and streaming lead the way
Overall, its Experiences division, which also includes domestic and international theme parks, cruise lines, and consumer products – like its video games and retail stores – saw revenue increase 6% to $8.9 billion, with operating income up 9% to $2.5 billion.
But its Entertainment division, which includes TV networks, streaming, and movies – led the way in Q2. The division generated $10.7 billion in revenue, up 9%, and $1.3 billion in operating income – up 61%.
Direct-to-consumer (DTC) streaming saw an 8% rise in revenue to $6.1 billion and operating income soared to $336 million, up from $47 million in Q2 of 2024. The number of Disney+ subscribers rose 1% while Hulu subscribers increased 2%. The average revenue per subscriber for Disney+ jumped 3% to $7.77, while it rose 1% for Hulu live TV to $99.94.
Content sales and Licensing, which includes Disney films, also did well with a 54% boost in revenue to $2.1 billion, offsetting a 13% revenue decline in linear TV networks top $2.4 billion.
Finally, Disney’s sports division, which includes ESPN, saw a 5% revenue increase to $4.5 billion, but saw operating income decline 12% to $687 million. The drop in income was related to higher production costs for airing three additional College Football Playoff games as well as one additional NFL game. Also, ESPN+ subscribers dropped 3%.
New ESPN DTC launch coming
Among its plans in the near future, Disney is planning to roll out a new DTC sports streaming service this year. While the timing of the launch and the price for the service were not disclosed, Iger referenced it in his comments.
“Following an excellent first half of the fiscal year, we have a lot more to look forward to, including our upcoming theatrical slate, the launch of ESPN’s new DTC offering, and an unprecedented number of expansion projects underway in our Experiences segment,” Iger said. “Overall, we remain optimistic about the direction of the company and our outlook for the remainder of the fiscal year.”
Among the theatrical releases, the new Marvel Thunderbolts movie is off to a great start, bringing in $161 million in its first week. Also coming up are Lilo and Stitch, the new Fantastic Four film, and Freakier Friday.
In Q3, or the June quarter, Disney expects a modest increase in Disney+ subscribers.
For the full fiscal year, it anticipates a 16% jump in adjusted earnings to $5.75 per share. Within its divisions, it anticipates double-digit percentage operating income growth in Entertainment, 18% operating income growth in Sports, and 6% to 8% income growth in Experiences. Further, it expects cash from operations to rise by $2 billion to $17 billion.
However, Disney noted that “uncertainty remains regarding the operating environment for the balance of the fiscal year.” One of those uncertainties is whether the Trump administration will put tariffs on foreign-made films imported to the U.S., as has been threatened.
Disney stock was up 10% on Wednesday and is down 8% YTD. It is trading at 29 times earnings, which is the lowest in more than a year, and 16 times forward earnings. Given the outlook, valuation, and momentum in streaming, in addition to some promising summer films, Disney stock looks pretty good right now.
