Disney Stock Is Roaring Back to Life

Shares of Walt Disney (NYSE: DIS) opened sharply higher on Thursday, following better-than-expected financial results earlier in the day. The 8% pop at market open finds the media giant's stock trading at its highest level in more than six months.

I argued at the start of this trading week that a strong fiscal fourth-quarter report could send Disney shares back above $100 for the first time in months. The blowout performance is making sure that the stock won't just be a temporary tourist in the three-figure mark.

Disney's results for its latest quarter narrowly beat analyst expectations on both ends of the income statement. That's good. Its long-term growth projections for the next three years were even better. That's great.

Minnie's major quarter

Disney saw its revenue rise 6% to $22.6 billion for the three months ending in September, a smidgen above the $22.4 billion that Wall Street pros were targeting. A 14% top-line surge for its entertainment business did all the heavy lifting, fueled by a pair of box-office blockbusters. Continued strength for its streaming business was again more than enough to offset a decline in its legacy, but transitory, linear networks operations.

Disney's sports broadcasting business was flat. Its theme parks-helmed experiences segment eked out a 1% uptick in revenue, and that was a welcome surprise. Rivals United Parks (NYSE: PRKS) and Comcast's (NASDAQ: CMCSA) Universal that also rely on Central Florida as their primary market posted slight declines in revenue and operating profit.

The bottom-line beat was even more impressive. Disney's overall operating profit rose 23% for its fiscal fourth quarter. Adjusted earnings per share soared 39% to $1.14, ahead of the 34% increase that analysts had established as their profit target.

A lot of things went right for Disney in the seasonally potent summer quarter. The surge in audiences going to see Inside Out 2 and Deadpool & Wolverine saved both Disney and the multiplex industry itself. It reversed the segment's $149 million operating loss a year earlier, when Disney was fumbling to connect with moviegoers, into a $316 million operating profit.

On the streaming front, Disney built on the direct-to-consumer business, turning barely profitable in the fiscal third quarter. It accelerated to a $321 million operating profit in this week's fourth-quarter update. This is a sharp turnaround for a business that served up a catastrophic operating loss of $1.5 billion in the fiscal fourth quarter two years ago.

CEO Bob Iger arrived at Disney 24 months ago, setting an aggressive timeline to make its streaming business profitable by the end of fiscal 2024. Mission accomplished.

Image source: Disney.

Oh, Mickey, you're so fine

Disney issued some guidance for the new fiscal year, as well as some additional projections looking out to fiscal 2026 and 2027. It sees high-single-digit growth in adjusted earnings per share in fiscal 2025.

The consensus among Wall Street pros heading into Thursday morning's update was for the House of Mouse to post a profit of $5.09 a share in forward earnings. That's just 2% higher than the $4.97 per share it just posted in fiscal 2024, so you can be sure that analysts will be jacking up their forecasts in the coming days.

Even better, Disney is now modeling adjusted earnings-per-share growth accelerating to double-digit gains in fiscal 2026, as well as fiscal 2027. Looking out for the next three years actually laps Iger's succession plans, but the rosy optimism is certainly welcome.

Disney is silencing the skeptics after a rough couple of years. Investors won't have to wait for three years to see the media stock thrive. It has two major movies coming out this quarter -- Moana 2 and Mufasa: The Lion King -- that could rival this summer's one-two punch at the box office.

Disney mentioning on Thursday that dividend growth should track its bottom-line gains means that investors can expect at least three years of hikes to its recently restored payout. The company is looking to complete $3 billion in stock repurchases, increasing its per-share profitability in the process.

Disney has been a stock market laggard over the past couple of years, but the bears appear to be heading into hibernation now. In a year that saw Disney's domestic theme parks replace Br'er Bear with Princess Tiana, it's good to see the entertainment bellwether donning a tiara as media royalty again.

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Rick Munarriz has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool recommends Comcast and United Parks & Resorts. The Motley Fool has a disclosure policy.