It's a Great Big Beautiful Tomorrow for Disney Stock

Walt Disney (NYSE: DIS) delivered a beat on both ends of the income statement on Wednesday morning. It wasn't enough to initially impress Wall Street. Problematic dips in its theme park operating income and sequentially for Disney subscriber numbers -- as well as the media giant failing to boost its earlier profit growth target for fiscal 2025 despite a blowout first quarter -- kept the market's pixie dust in its pockets at first.

Last year's fiscal first quarter was going to be a hard act to follow. The stock soared following a modest earnings beat, but that was because it came with a laundry list of positive announcements as Disney was fending off a pair of activist investors. There are no boardroom challenges heading into this springtime's annual shareholder meeting, so the results would have to be enough this time around.

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Clicking through the quarterly turnstile

Disney's revenue clocked in at $24.7 billion for the holidays-spiked fiscal first quarter ending in December. It's a modest 5% year-over-year increase, but analysts were bracing for a mere 4% advance. A 9% jump in its entertainment segment was held back by a 3% gain for its theme parks-led experiences business and a flat top-line performance for its sports arm.

The news gets substantially better as we work our way down the income statement. Segment operating income soared 31%, topping $5 billion for the fiscal first quarter. The operating profit for its entertainment segment nearly doubled, as an 11% slide for its legacy linear networks business was no match for the profitable reversal for its streaming services as well as its theatrical sales and content licensing operations that were losing money a year earlier.

Experiences -- accounting for more than 60% of Disney's operating income -- was flat. Improvement at its international operations was washed away by a 5% decline at its needle-moving domestic theme parks and cruise lines. A pair of disruptive late-season hurricanes and expenses related to the launch of its latest cruise ship in December gnawed away at the segment's profitability.

The bottom line itself was stellar. Adjusted earnings per share soared 44% to $1.76, well ahead of the $1.43 that analysts were modeling. Disney consistently landed ahead of Wall Street expectations through fiscal 2024, but this 23% beat is the largest margin of victory for reality over profit targets in more than a year.

Image source: Disney.

Shining at the end of every day

Disney's guidance calls for high-single-digit growth in adjusted earnings per share in fiscal 2025, along with $15 billion in cash provided by operations and $3 billion in stock repurchases. These are things you typically shout from the rooftops, but it's exactly what the House of Mouse was belting out from the roof of its fiscal fourth-quarter results three months ago. After a 44% catapult in adjusted profits in the fiscal first quarter, one could've hoped that it would've revised that full-year forecast to the low double digits, at least. It doesn't mean that it won't get there. Disney under CEO Bob Iger has proven that it can typically blow through conservative guidance. It just sends the wrong message when the goal posts don't move after a blowout performance. The stock moving 12% higher between the two financial updates doesn't help.

Disney is still positioned to succeed in fiscal 2025. It has a strong slate of theatrical releases on the way, hoping to build on the momentum it achieved in the 2024 calendar year when it put out the world's three highest-grossing movies. Its domestic theme parks business could pick up in May when Disneyland kicks off more than a year of festivities celebrating the original theme park's debut 70 years ago. A profitable Disney lifts the ceiling of what is possible on the streaming end. Even the sometimes costly sports segment is targeting a double-digit increase in operating income this fiscal year.

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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.