Disney: How investors are prioritizing its units ahead of earnings results

Yahoo Finance entertainment reporter Allie Canal breaks down Wall Street's expectations for Disney's business units ahead of tomorrow's earnings call.

Video transcript

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SEANA SMITH: Let's take a look at Disney. You're looking at shares closing up just about 1.6% today, 1% up just about 24 hours before the company's expected to release its earnings report tomorrow after the-- after the bell. Allie Canal joining us now with a preview on what we can expect. Allie, there's a lot going into this, Bob Iger is back, there's lots of questions about the tone that he's going to really use on the earnings call, the proxy fight, where do you start?

ALLIE CANAL: I think number one is Bob Iger, he's sort of the not-so elephant in the room, he's this larger-than-life force, he's beloved on Wall Street, he's beloved by investors. And the Street is pretty bullish if he's going to come in here, and he's going to strike a very clear tone, prioritize DTC profitability over subscriber gains. And for that reason, I wouldn't be surprised if we saw those 2024 subscriber numbers revised down a little bit because of that emphasis on profitability.

And besides just streaming, I think there's a strong emphasis on the theme parks, especially the domestic theme parks. Disney already said that the holidays were particularly strong at the parks, and that should greatly aid Disney's bottom line moving forward. But if you think about Disney+, that is expected to take a little bit of a dip in the quarter due to the absence of the IPL tournament on its Indian brand Disney+ Hotstar. However I think in the medium to long term there is this bullish sentiment, especially as streaming losses are expected to improve to less than $1.3 billion in the first quarter versus a loss of $1.5 billion in Q4. So a lot to track as you said between the parks, between streaming, and then of course, the return of Bob Iger.

DAVE BRIGGS: Certainly a loss of subs on the cricket. I understand those aren't as valuable as subs as they would be in other countries such as this one. I'm curious what we might hear about this plan to potentially license content to their competitors, what do we know?

ALLIE CANAL: Yeah. And that was an interesting strategy that they came out with, especially because Disney has always been known for loving their content, keeping it to themselves, right? These streaming exclusives. That's a strategy that Netflix has had really success in with all their Netflix originals. So I think we are going to need more clarification, more information about this strategy.

And I think that's priority number one for investors, what is the streaming strategy, what do you do with Hulu, what do you do with ESPN? There is a lot of varying opinions on this on the Street but I think if you look at something like Hulu, which obviously has strong content with shows like "The Bear," "Only Murders in the Building," there is this sense of should Disney sell it to Comcast or maybe another buyer to de-lever some of that balance sheet to help with some of the debt that they have.

And then on top of all this, of course, you have Nelson Peltz and the Trian Fund, pushing you know, operational changes to the company overall. So there's going to be a lot of questions on this earnings call. And it will be interesting to see what Bob Iger chooses--

DAVE BRIGGS: Yeah.

ALLIE CANAL: --to address first and set as his really main priority to start the year.

DAVE BRIGGS: Disney's board has been pretty clear on the pushback to Trian and to Nelson Peltz. Do you really think they'll address it? And do you think we'll hear anything about layoffs, you're hearing a whisper that Bob Iger may come in with a hatchet.

ALLIE CANAL: I definitely think we're going to hear something about layoffs, something about restructuring. I think overall this company is one that needs to cut costs. This could be you know, sort of focused in certain areas of the business, like the linear side of the business for example. NBC Universal just a few weeks ago did the same thing, announcing different cost-cutting strategies for linear specifically. But Disney has been teasing layoffs, teasing this restructuring--

DAVE BRIGGS: Yeah.

ALLIE CANAL: --for a little bit. So I'd be very surprised if we didn't hear anything on that. And in regards to Peltz, I don't think Iger will address it unless he's specifically asked by an analyst on the call. But overall I think he's going to try and stay clear of that.

DAVE BRIGGS: And in all likelihood, there's-- I mean, every analyst that comes on wants an answer on Hulu and ESPN to your prior point, just not sure you're going to get anything on either one. We've long been told that Bob Iger is a huge fan of ESPN, strong relationship with Jimmy Pitaro and the sports products there. So in all likelihood, those analysts are going to be disappointed on both. The Hulu relationship will likely extend as well. Won't they both kind of stay as they are?

ALLIE CANAL: I agree at least for this quarter, right? And I think maybe what we get on the strategy front could give a little bit of a hint to how they will approach Hulu and how they will approach ESPN, but I think, again priority number one is just laying out the strategy, what are we as a company? Are we want to-- do we want to rely on what we do best, which is family-friendly content, focus on just Disney+, or do we like the fact that we have Hulu, that we have this adult content, that we're a little bit more diversified? I don't think we have that answer yet when it comes--

DAVE BRIGGS: Yeah.

ALLIE CANAL: --to their overall streaming strategy. So there needs to be more clarity there.

SEANA SMITH: Yeah, certainly does need to be more clarity there. Of course, we will be watching that, looking at the earnings report, and then also have it covered for everyone after the call special following the earnings call that we will get from Disney tomorrow.