The Quarter We Were Looking For From Disney: Some of the turnaround efforts initiated by CEO Bob Iger upon his return to the helm from former CEO Bob Chapek appear to be gaining momentum. This development comes as a relief, given the stock's stagnation, which has attracted activist pressure from investor Nelson Peltz and his firm, Trian Management. Notably, the company's focus on financial discipline has yielded positive results this quarter, particularly in cost controls and margin improvement. Disney is well on track to achieve its target of slashing $7.5 billion from the business by fiscal 2024, contributing to an impressive earnings beat despite revenue growth remaining stagnant. Additionally, Disney unveiled strategic moves, including the forthcoming launch of its flagship ESPN streaming service in 2025 and a $1.5 billion investment in Epic Games, the studio behind Fortnite. Coupled with the management team's acknowledgment of past missteps in studio productions and renewed emphasis on quality over quantity, these actions signal a positive trajectory. As longstanding admirers of Iger, we're optimistic about the continuation of this trend. The icing on the cake: the Taylor Swift Eras Tour film is set to stream exclusively on Disney+ starting March 15th.
Leadership in QSR: It was an intriguing week in the quick-service restaurant category, with updates from three major players: Chipotle, McDonald's, and Yum Brands (KFC, Pizza Hut, Taco Bell). McDonald's and Yum Brands shared similar stories of softer traffic trends, challenges in the Middle East, and emerging weakness among lower-income consumers opting for more affordable options. However, Chipotle stood out with a completely different narrative, showcasing consistent strength in its business, growing traffic, and broad-based customer appeal. While Chipotle may not face the same geopolitical headwinds as its counterparts, even when focusing solely on North American operations, it operates in a league of its own. Under Brian Niccol's leadership, Chipotle has demonstrated operational excellence and forward-thinking approaches to meet customer demand. They grasp their value proposition, understand their customers, and continually enhance their offerings. Despite being Chipotle investors for some time, we're constantly impressed by their ability to surpass expectations and maintain momentum.
Ford Gaining Traction: Ford provided investors with positive news this week, signaling a turnaround after facing operational challenges and manufacturing hurdles that impacted profitability. CEO Jim Farley (yes, they are related) has openly acknowledged the company's recent shortcomings and urged patience from Wall Street, promising improved results. It appears that these efforts are yielding results, at least for now. Farley's passion for the products and brands, coupled with his background as a "car guy," sets him apart from previous CEOs. This enthusiasm has translated into successful initiatives such as the revival of the Bronco brand, innovative products within the Mustang lineup, the transformation of the Lincoln brand, and the continued success of the F series trucks. With improved operational performance and focused cost discipline around their EV strategy, we anticipate positive developments ahead.
Live Sports Streaming Venture: In further streaming news this week, Disney, Fox, and Warner Bros Discovery jointly announced a new live sports streaming product slated for launch this fall. This venture, distinct from Disney's direct-to-consumer ESPN offering scheduled for 2025, is a collaborative effort with each company owning a third. The bundle will encompass live sports content from the three broadcasters, including ESPN and ABC from Disney, TNT, TBS, and Tru TV from Warner Bros Discovery, and the Fox sports channels. Interestingly, NBC is not part of this venture. While pricing details are yet to be disclosed, it is anticipated to fall within the $45-50 range per month. This development underscores ongoing efforts by Disney and others to capitalize on the lucrative live sports broadcasting market.
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