3 Things Investors Need to Know About Walt Disney Right Now

The Walt Disney Company (DIS 5.46%) topped last quarter’s earnings estimates, and then further fanned the bullish flames with better-than-expected guidance. Shares soared on Thursday following the release of its fiscal fourth-quarter results.

As veteran investors can attest, however, the devil is in the details. Sometimes things that are initially overlooked come back to undermine a rally, once investors have time to peruse the fine print.

With that as the backdrop, there are three big takeaways buried in Disney’s fourth-quarter results that you may want to consider before making a buy/sell decision.

3 takeaways from Disney’s Q4

For the three-month stretch ending in September, Disney turned $22.6 billion worth of revenue into a per-share profit of $1.14. Both numbers are up from the year-ago figures of $21.2 billion and $0.82, respectively. And both numbers topped estimates for a top line of just under $22.5 billion and a bottom line of only $1.10 per share.

Theatrical films and streaming accounted for the bulk of this improvement, offsetting weakness from the company’s theme parks and television business.

But there are some things you’ll want to know about the true condition of Disney right now.

First, although the company’s film business showed a marked revenue improvement, most of last quarter’s 23% increase in gross operating income was delivered by its streaming platforms Disney+ and Hulu. They collectively swung from an operating loss of $420 million in the fourth fiscal quarter of last year to operating income of $253 million this time around. This progress has been underway for some time, but only now is the streaming side decisively getting over the profit hump just now.

Data source: The Walt Disney Company. Chart by author. Figures are in millions.

Sure, the company’s studio is seemingly back in growth mode, boosted by the recent release of Inside Out 2 and Deadpool & Wolverine.

Dig deeper, though, and you’ll see the second takeaway: Last quarter’s box office results are only relatively better than a recent soft patch for this division. Disney’s films are still contributing less to the bottom line than they were before the pandemic, even with the occasional blockbuster film. But these blockbusters are now fewer and far between.

Data source: The Walt Disney Company. Chart by author. Figures are in millions.

You have to wonder if the pandemic-inspired acceleration of streaming’s growth is at the heart of the film industry’s current challenges.

Lastly, while Disney’s guidance for the next three years calls for double-digit growth in profits per share, there’s suspiciously no mention of revenue growth. It appears the bulk of any bottom-line improvements are going to remain the result of cost cutting and stock buybacks. (The company has budgeted $3 billion for buybacks in the…