Diving Into Josh D'Amaro's Whole New World
Key Points
Shares of media giant Walt Disney opened 6% higher on Wednesday after strong fiscal second-quarter results.
Disney's earnings beats accelerated for the first time in more than a year.
The House of Mouse sticking to its double-digit profit targets for these next two fiscal years should ease the minds of investors who were bracing for another consumer-facing company proving mortal.
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The Josh D'Amaro era is off to an encouraging start. Shares of Walt Disney (NYSE: DIS) opened higher on Wednesday after the leisure and media giant posted better-than-expected results for its fiscal second quarter. It was D'Amaro's first earnings season as Disney's new CEO, but it's only fair to point out that he was only at the helm for the final two weeks of the quarter itself.
D'Amaro has had a needle-moving leadership position for years, so he certainly deserves the victory lap even if he was promoted on the final day of the fiscal period. However, this report would be more critical of what Disney sees going forward than of what happened in the past. D'Amaro aced that test, too.
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Image source: Disney.
Those numbers are pretty sweet
Investors had low expectations heading into Wednesday morning's financial update. Analysts were targeting a 5% increase in revenue, and an even more unimpressive 3% step-up in net income.
Reality was marginally but definitively kinder. Disney revenue rose 6.5% to $25.2 billion. It may not seem like much, but it's the biggest top-line jump for the House of Mouse over the past year. All but an even more unimpressive 3% rise in three of Disney's segments -- entertainment, sports, and experiences -- generated positive results.
Disney's entertainment revenue led the way with a 10% return. Revenue for its entertainment streaming services rose 13%, accelerating from the fiscal first quarter and more than offsetting the steady decline of its legacy media networks business. The segment also benefited from favorable theatrical release comparisons and the Fubo transaction that closed in the fiscal first quarter.
The theme parks-helmed experiences business had all eyes on it, given the headwinds that emerged near the end of the period as gas prices rose in the wake of the war with Iran. The segment matched Disney's overall 7% increase, as its cruise ship fleet added two new ships over the past year and its gated attractions improved despite a natural drop-off in international visitors.
Sports rose a more modest 2%, and it was the only segment to post a decline in operating profit. It still could've been worse. D'Amaro recently said that Disney doesn't intend to spin off ESPN.
The bottom-line news was even more encouraging. Disney's adjusted net income rose 8% to $1.57 per share. After more than a year of decelerating earnings beats, Disney stepped on the gas pedal again.
| Quarter | EPS (estimate) | EPS (actual) | Surprise |
|---|---|---|---|
| Q1 2025 | $1.43 | $1.76 | 23% |
| Q2 2025 | $1.21 | $1.45 | 20% |
| Q3 2025 | $1.45 | $1.61 | 11% |
| Q4 2025 | $1.02 | $1.11 | 8% |
| Q1 2026 | $1.58 | $1.63 | 3% |
| Q2 2026 | $1.50 | $1.57 | 5% |
Data source: Yahoo! Finance.
Just keep swimming
Disney stock is responding well to the fresh financials, but it's not even the quarter itself that is comforting the market. The real risk with Wednesday morning's report was how it would pose its near-term outlook, given the perfect storm of demand-sapping geopolitical and inflationary headwinds.
The company stuck to its previous guidance of double-digit earnings growth for this fiscal year and fiscal 2027. It sees adjusted earnings per share rising 16% in fiscal 2026, rising 12% if you back out the extra week this time around. After single-digit growth through the first two quarters, there should be material improvement in the second half. The $5.3 billion in operating income it's forecasting for the current fiscal quarter is 25% higher than the prior year's fiscal third quarter.
Disney also mentioned that current demand at its domestic parks and resorts was healthy. It recognizes that macroeconomic uncertainty is weighing on consumers today, but aside from the drop in international guests, folks still seem willing to pay up for Disney's brand of recreational escapism.
It checked most of the boxes that bulls needed to hear. The Josh D'Amaro era is off to a strong start. Now comes the fiscal third quarter, D'Amaro's first full quarter serving as CEO. With a fresh vision for stretching the possibilities of its industry-envying ecosystem, it's starting to seem like a great, big, beautiful tomorrow.
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Rick Munarriz has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool has a disclosure policy.
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