By Michaela Gordoni
Disney’s CFO Hugh Johnston explained what Disney’s Q4 results reveal about its next phase.
“For the year we delivered 19% EPs growth, which is, I think, pretty darn good in the context of the media and entertainment space, I think is very, very good,” Johnston said on Nov. 13. “And over the last three years, we’ve actually delivered 19% EPs growth per year for the last three years.”
“DTC, terrific quarter, 12.5 million sub ads, 40%. Operating income growth hit 1,000,000,003 this year compared to 100 million bucks last year. And then the experiences business grew revenue 6% and grew operating income 13%.”
The company is on the up-and-up on both the entertainment and experience sides.
“We glided to double digit EPs growth for the year, doubled the share repurchase, 50% increase in the dividend. Overall, we feel good about being what I refer to as an earnings compounder, and I think eventually investors are going to get conviction around that as well,” Johnston said.
Related: Disney Announces Plans To Roll Out Hulu, Disney+ App
Streaming and cinema are doing very well.
“And the things that we find most important, number one, reducing churn and number two, increasing engagement,” Johnston said of Disney’s streaming services. “If you look at the sub increase in total, as you mentioned, about half of it and this was expected was the charter deal and that those wholesale subs. But the other half was retail.”
“And with that retail over half of that was international, which is strategically quite important for us,” he explained. “And the balance of it was the bundles that we’re doing with Disney+, with ESPN. One of the things I think we’re most excited about is fully 80% of those new retail subs on, on ESPN are actually bundled subs, which again, should contribute to engagement, should contribute to retention, and frankly, make the service more valuable over time.”
He says consumers are being more choosy when it comes to experiences, so Disney isn’t holding back on anything.
“…Disney experience, you don’t want to cheap out on that… Bookings for the first quarter are up 3%,” he stated. “So we feel good that we’ve got continued momentum there… The amount spending per head at Walt Disney World was up 5% for the quarter.”
“So again, people are spending. And then… cruise ships, despite the fact that we’ve added a lot of capacity and cruise ships, we’re selling out at the same rate that we had been previously. So that added capacity is filling up quickly.”
While lots of areas are looking good, Johnston believes Disney’s stock is underpriced.
“I believe investors are going to build conviction in it overtime. And we actually see some investors doing that right now,” he said. “But I think we need to continue to prove the case that, you know what, as we go through this transition, we are going to emerge one of the winners.”
“Our strategy is different. We run broad in terms of DTC. We have news, we have sports, we have broad-scale entertainment, kids’ entertainment. Who knows?” he said.
With the Q4 results, Disney’s stock plunged 8%. “The combination of lower theatrical comparisons and reduced political advertising led to earnings volatility across major business segments,” Coin Central’s Yasmin Werner reported
Disney CEO Bob Iger and Johnston revealed in a joint statement that as it’s integrating Hulu, it will continue to prioritize direct-to-consumer growth and consolidate all U.S. content within a single app.
Read Next: These Family-Friendly Movies Increase Disney’s Q1 Earnings
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