Disney stock has a lot to prove this week

I’m riding a lot walt disney (DIS -0.46%) The company is scheduled to release its fiscal first quarter financial results this week. When the media giant releases its earnings report and hosts a conference call shortly after the market closes on Wednesday, it’s not just about numbers. There’s a proxy war going on with several activists who feel Disney isn’t doing enough to deliver shareholder value.

If the big, important stakeholders are right, fellow investors will elect new directors at the annual general meeting on April 3. This will come at the expense of Disney’s preferred list of directors. This is a message from retail and institutional investors that could shake up the House of Mouse’s leadership rankings. This is CEO Bob Iger’s last opportunity to release financial results before a shareholder vote. He cannot help but be disappointed.

a whole new world

Things were easier the first time Iger took command. During his reign, he spearheaded deals to acquire major content assets from Pixar, Marvel, Lucasfilm, and 21st Century Fox, calming their rocky empire while ensuring that no other media company had anything close to their intellectual property arsenal.

He is set to resign at the start of the COVID-19 crisis. His chosen successor, Bob Chapek, did not get his way. Iger’s return after 33 months was initially celebrated by the investment community, but it was a humbling experience. The stock closed at $97.26 on November 21, 2022, the first day of trading after Disney announced its beloved former CEO would be returning. The stock entered the week at $97.13, essentially flat compared to a 26% gain in the general market.

Losing a proxy war sometimes sends shock waves all the way to the top. This is a ‘no confidence’ vote from shareholders. Even if the Disney board loses this battle, it won’t go this way. Regardless of the outcome, Iger likely won’t open before his CEO contract expires in two years and has indicated he doesn’t want to stick around beyond the end of fiscal 2026. He routinely expanded to the point where he wrote a best-selling book, a memoir of his 15 years leading Disney, but if this sequel falls apart, his legacy will take a hit. Disney should deliver decent results and compelling optimism on Wednesday afternoon.

Image source: Disney.

one small flame

Wall Street experts have some expectations about this week’s results. They see revenue of $23.7 billion for the three months ending in December, less than 1% of revenue a year ago. Sluggish theatrical releases over the holidays, fewer consumers, and year-over-year stabilization at Disney World will likely curb sales growth for Disney+, cruise ships, and non-Florida gated attractions.

Analysts are calling for earnings of $0.99 per share, flat from a year ago. This is where Disney stands out. It has posted earnings of more than 8% in three of the last four quarters. Disney has also succeeded in cutting costs, especially for its streaming service, which is expected to be profitable by the fourth quarter of this fiscal year.

Disney doesn’t fully flesh out its guidelines like other companies, which is a sticking point for some activists. It doesn’t start this week. But Iger will have to present Disney’s future during the call as if his own legacy were riding on it. There are several potential theatrical releases in 2024 that could lift Disney out of its box office slump, but they won’t hit local multiplexes until May. A showdown awaits against Disney World’s biggest rival. comcast, when its competitors open eye-catching new theme parks next year. Iger’s timeline for breaking even on his streaming service won’t be officially announced until early November.

In less than two months, there will be some question marks at the iconic media stock’s shareholder meeting. This is Disney’s best opportunity to make his point – an exclamation point.