Shareholders of ESPN and ABC parent The Walt Disney Company have spoken, and based on the tabulation of its proxy solicitor, “it appears that Disney’s full slate of 12 directors has been elected by a substantial margin” over the nominees of The Trian Group and Blackwells at the company’s 2024 annual shareholders meeting.
While final voting tallies are subject to certification by Disney’s independent inspector of elections, and preliminary and final results will be included in the company’s forthcoming SEC filings, due in the next few days, it appears the battle waged by dissident shareholder Nelson Peltz for new leadership and a fresh business direction is over.
What’s next for Disney? Analysts at MoffettNathanson have shared their views on the matter.
Shareholders on Wednesday (4/3) voted to elect all 12 nominees recommended by the Disney Board:
Mary T. Barra, Safra A. Catz, Amy L. Chang, D. Jeremy Darroch, Carolyn N. Everson, Michael B.G. Froman, James P. Gorman, Robert A. Iger, Maria Elena Lagomasino, Calvin R. McDonald, Mark G. Parker, and Derica W. Rice.
As Disney Board Chairman Mark Parker sees it, “We are immensely grateful to our shareholders for their investment in Disney and their belief in its future, particularly during this period of great change in the broader entertainment industry. We are fortunate to have a highly qualified Board of Directors who possess a profound commitment to the enduring strength of this company and an enormous amount of experience and expertise, including succession planning. I’m thankful for Bob and his exceptional management team, as well as Disney’s employees and Cast Members around the world, for continuing to deliver for consumers and shareholders throughout this distracting proxy battle.”
CEO Bob Iger, whose leadership was questioned by Peltz, who sought shareholder support after failed efforts to gain board support, thanked those who hold Disney stock “for their trust and confidence” in Disney’s board and its leadership. “With the distracting proxy contest now behind us, we’re eager to focus 100% of our attention on our most important priorities: growth and value creation for our shareholders and creative excellence for our consumers.”
As of 10:26am Eastern on Thursday (4/4), Disney shares were trading at $119.37, up slightly from Wednesday’s closing price on the NYSE.
DISAPPOINTMENT TEMPERED
Following Disney’s announcement late Wednesday that Peltz’s efforts have been thwarted, The Trian Group, which beneficially owns over $3.5 billion of Disney common stock, commented on the failure of both Peltz and Jay Rasulo to gain seats on Disney’s Board of Directors.
“While we are disappointed with the outcome of this proxy contest, Trian greatly appreciates all of the support and dialogue we have had with Disney stakeholders,” it said. “We are proud of the impact we have had in refocusing this Company on value creation and good governance. Since we re-engaged with the Company in late 2023, Disney has announced a host of new operating initiatives and capital improvement plans. The Board has been refreshed with two new directors. Over the last six months, Disney’s stock is up approximately 50% and is the Dow Jones Industrial Average’s best performer year-to-date. We thank Trian’s investors for the confidence they have placed in our efforts. And, we wish the best for all of the Company’s stakeholders, including Disney’s Board and management team. We will be watching the Company’s performance and be focusing on its continued success.”
For MoffettNathanson Senior Analysts Rob Fishman and Michael Nathanson, “Disney
shareholders can celebrate the fact that the company’s stock price has regained its momentum,” something Trian acknowledges, too.
Fishman and Nathanson, in an investor note released Thursday, commented, “While it might have admittedly taken longer than we first expected back when we upgraded Disney to ‘Buy’ on the night of CEO Bob Iger’s return, the company has finally focused on fixing the key challenges that we were left behind by the prior CEO.”
This, they say, includes eliminating the centralized “DMED” structure, revisiting the over-expansive Disney+ strategy, reviewing the challenging business outlook for Star India and Disney+ Hotstar, and more aggressively managing costs in the face of linear network declines.
How can the momentum continue from here?
Fishman and Nathanson note that Disney has identified four key priorities to keep driving the company forward:
1) ensure streaming profitability
2) reinvigorate creativity
3) establish the future of media businesses (including ESPN and linear)
4) turbo-charge Parks
Lastly, the MoffettNathanson analysts the market “is finally reflecting optimism” that Iger and Disney CFO Hugh Johnston will drive upside to the company’s long-term operating profitability. “This starts with Disney delivering upon or outperforming its FY 2024 adjusted
EPS guidance of least 20% growth and pacing ahead of its $8 billion FY 2024 Free Cash Flow guidance,” they conclude. “In FY 2027, we think Disney can hit 14% DTC margin levels and ahead of consensus with $7.45 in EPS.”
But could it possibly be sooner? “To us, that is the key investor question tied to the fateful decision to rightly change the long-term direction of Disney away from linear and towards streaming.”
