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Disney earnings: What investors should expect

Yahoo Finance Live anchors discuss the expectations for Disney earnings as well as the media giant's battle with activist investor Nelson Peltz.

Video Transcript

[AUDIO LOGO]

- We are in the thick, in the midst of earnings season. But as usual, Soz is a few weeks ahead. He's looking ahead to Disney already.

[LAUGHTER]

It's set to report results the first week in February. It's Bob Iger's first earnings call since returning as CEO. So what should investors be expecting? And how much noise will that activist fight be making?

[MUSIC PLAYING]

I wonder what they'll have to say about that.

- Yeah .

- Soz-- I'm already over the--

- --hey, can't you just live in the moment, man?

- No, man. I'm already over these Microsoft results. I'm looking forward to Disney in a couple weeks, as you mentioned, Julie. And, also as you mentioned, this will be Bob Iger's first earnings call since returning as CEO in late November and shocking, really, the business community in doing so.

And Wells Fargo's media analyst, Steven Cahall, really one of the best media analysts out there on the street, thinks big Bob will come out swinging. He says this. We think Disney management will come out swinging on the earnings call to fend off criticism. Of course, that criticism-- oh, wow, there I am next to Bob Iger. I never thought I'd be, uh, next to Bob there in that photo.

[GIGGLING]

Criticism, of course, coming from Nelson Peltz, the noted activist investor. Here's what Cahall expects on Disney earnings day, ultimately. He thinks Disney will back away from the aggressive fiscal year 2024 subscriber targets for Disney+ put in by now-former CEO Bob Chapek. That range or guidance range was $215 million to $245 million, the top end of that certainly looking optimistic given the strength, or the renewed strength, over there at the likes of Netflix.

Next up, clear focus on direct-to-consumer profitability. The street has wanted to see Disney put up some profits here from all that growth in Disney+, Hulu+, ESPN+. That has not happened just yet. Maybe Iger can make that happen.

Next up, a reiteration of 2023 operating income growth guidance, something to always watch out for. And the big news, at least according to Cahall, might come on cost cuts. Now, Chapek originally got this ball rolling when he was CEO. And that ball or baton has been since handed off to Iger. Cahall sees, potentially, close to $2 billion in cost cuts from Disney. That would be-- really, Bob Iger is not known for cutting costs at Disney, but that'd be a real, just a major cost-cutting plan put in by Iger to just drive better profits, notably at the direct-to-consumer business.

No portfolio changes. We've seen Disney under pressure from various investors the past few years to get rid of an ESPN or spin it off. He-- Cahall does not expect that to happen. But I did mention that criticism from Nelson Peltz here. Let's go through Disney, the numbers on Disney here, which I think helps explain why you're seeing Peltz trying to ultimately get this board seat.

Shares of Disney down 23% in the past year. Now, the stock is up 15% since Iger came back or was announced is coming back on November 20ttyh. A. lot of expectations that Iger can come in here and turn things around and, of course, I think, cut costs. And the direct-to-consumer business lost $1 and 1/2 billion in the preceding quarter, despite a lot of new subscriber growth in Hulu+, ESPN+, and Disney+ as well. It's up to Iger to figure out how to make money from that move to streaming, which has been a very big pivot put in place by Chapek. And then, again, of course, that ball's now being handed off to Iger.

My take right here, II think Nelson Powell is gonna get on this Disney board, come hell or high water, guys. I think he makes a lot of great points. His presentation on about reclaiming Disney makes a lot of sense to me. I think it makes a lot of sense to investors. I think Nelson wants to come in there and help drive better productivity inside of a business that has not been focused on productivity through the years.

And he has shown a proven track record of turning consumer products companies around. I think he's doing that or he started to do that a little bit at Unilever. We talked to CEO, Alan Jope, at the World Economic Forum. He has embraced Nelson Peltz. And then, of course, he helped really engineer a strong turnaround over at Procter & Gamble.

- You know, our graphics department does great work. That is a missed opportunity to put Nelson Peltz in a Prince Charming costume. That's all I'm--

- Oh!

- Oh.

- That's all I'm saying. That's all I'm saying. That would've been-- that would've been good, right?

- Well--

- Well, this one is going-- this one is--

- Maybe.

- There it is.

- Maybe.

- This one is going to get ugly.

- Or at least the ears.

- Right. This--

- Oh, yeah.

- This battle could very well be one of the nastiest and ugliest activist battles, probably in the past decade, There is no indication that Iger wants to give Peltz a seat on the board. And just buy what Disney put out last week and in statements of its own, they really hate the guy. Maybe they shouldn't.

- So maybe more of, like, a Shrek costume.

- No.

- Is Shrek Disney? Now I don't even remember.

- Ooh. I don't reme-- just DreamWorks. Isn't that DreamWorks?

- Oh, yeah. No, you're right, you're right, you're right.

- Yeah. That's--

- Who's, like, a great Disney villain?

- Always got ideas, Julie?

- Jafar.

- (IN EARPIECE): Jafar.

- OK, Jafar, there you go.

- Yeah. Multiple people.

[LAUGHTER]

All right. Wait, who yelled Mufasa?

- Mufasa's not a villain. Mufasa's not a villain.

- He's not a villain. All right, we're taking this out.