What's Sending Shares of Disney Lower This Week?
Key Points
Disney missed on revenue for the quarter.
Revenue from the entertainment unit fell 6%.
An ongoing dispute with YouTube TV is hurting revenue.
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Shares of Walt Disney (NYSE: DIS) are down sharply this week. What's the reason?
Disney reported its fiscal fourth-quarter financial results on Thursday, Nov. 13, and investors were disappointed.
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The entertainment and theme park giant beat earnings estimates for the quarter. It reported adjusted earnings of $1.11 a share, 3% lower than the same quarter last year but six cents higher than the $1.05 Wall Street expected.
Image source: Getty Images.
Yet profits from Disney's linear TV segment, including channels like ABC and ESPN, fell 21% to $391 million. And linear TV revenue dropped 16% to about $2.1 billion.
And while overall revenues of $22.5 billion for the quarter were 3% higher than a year ago, they were slightly below the $22.8 billion analysts projected. And probably of most concern to Wall Street, revenue from the company's entertainment segment -- its largest revenue stream -- fell 6%, from about $10.8 billion to $10.2 billion, as both TV advertising and box office sales dropped. That's not a positive sign.
YouTube dispute
Just as concerning as falling entertainment profits and revenues is Disney's ongoing carriage dispute with YouTube TV, which began on Oct. 31. The two sides have yet to negotiate a new agreement, and Morgan Stanley estimates that Disney is losing about $30 million a week due to the standoff. Worse, Disney CFO Hugh Johnston indicated that negotiations with YouTube (which is owned by Alphabet's Google) could last a while. "We're ready to go as long as they want to," Johnston said.
Full disclosure: I am a YouTube TV subscriber and this week was offered a $20 credit to compensate for the loss of Disney content, including ABC, ESPN, and related channels, as well as Monday Night Football, one of the most popular shows on television.
Disney's financial results, coupled with remarks suggesting the YouTube dispute could linger and cost the company even more revenue, sent the share price 8% lower on Thursday. The stock is down about 4% year to date, while the broader S&P 500 index is up 15%.
Big promises
On the positive side, management has promised share repurchases of $7 billion in 2026, double the amount of 2025. And it declared a cash dividend of $1.50, 50% higher than the $1 paid in 2025. Both should benefit shareholders. The company is also expecting double-digit year-over-year EPS growth in fiscal 2026 and again in 2027.
If the company can deliver on those promises -- a big if -- the share price should climb higher.
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Matthew Benjamin has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Walt Disney. The Motley Fool has a disclosure policy.
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