Returning Disney CEO Bob Iger will face the company’s shareholders Wednesday afternoon amid a firestorm of upcoming financial and board decisions.
Wall Street traders and Disney investors will get a look at the entertainment conglomerate’s fourth-quarter results after the market closes, with former chief Iger back on board to face the company’s existing streaming service, a potential future without ESPN or ABC and a proxy fight with an activist investor.
Last month, activist investor Nelson Peltz said he wanted a seat on Walt Disney's board while also saying he wants to "restore the magic" in the entertainment and media company.
Peltz's Trian Group filed a preliminary proxy statement with the Securities and Exchange Commission seeking the position after announcing their intentions in January.
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Peltz said in a Trian press release that Disney has lost its way in recent years, "resulting in a rapid deterioration in its financial performance from a consistent dividend-paying, high free cash flow generative business into a highly leveraged enterprise with reduced earnings power and weak free cash flow conversion."
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The Walt Disney Co. said Monday it had set its annual shareholder meeting for April 3 with a focus on Peltz's bid seeking a seat.
In December, just one month after Iger returned as CEO, Wells Fargo analysts predicted in a company note that Disney would part ways with ESPN and ABC by the end of 2023, causing more shareholder upheaval while possibly further motivating Peltz and his Trian Group’s decision to join the Disney board.
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According to bank analysts, Iger will shift the mass media and entertainment company’s focus to content and cost rationalization while spinning off broadcast network ABC and cable sports channel ESPN.
Spinning off the two networks is the best path forward and a probable late 2023 event, leaving the Walt Disney Company an attractive pure play intellectual property company, the bank predicted.
In early November, the company reported fourth-quarter revenues and earnings below analysts’ estimates, posting $20.15 billion in revenues, while its diluted earnings per share "excluding certain items" decreased 19% year over year, coming in at $0.30.
Disney’s direct-to-consumer services segment generated $1.47 billion in fourth-quarter operating losses, roughly 134% wider than the $630 million reported in the same period in 2021.
Immediately following Iger’s return, he announced that Kareem Daniel, the head of media and entertainment, would also be leaving the company after taking the position under Chapek’s leadership, where he aided the former CEO in Disney+ streaming and oversaw the streaming service, domestic television networks and studios.
In an interview with FOX Business, Adam Kobseissi, founder of the financial newsletter The Kobeissi Letter, said Wall Street would be watching for two things in Disney's earnings Wednesday after the bell: "theme park and streaming revenue."
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"Disney reported streaming losses of $1.5 billion in their last quarter and have since raised Disney+ subscription pricing by $3 per month in December," he said. "Investors are really going to be looking for some promising signs that Disney+ is on the way to becoming profitable, their competitive advantage through Disney content is being capitalized on and that Disney is able to capture a significant portion of the streaming market.
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"On the theme parks front, we are looking for continued strength as consumers emerge from the pandemic but also look to see how inflation and higher rates have impacted spending at Disney resorts."
