4 Key Takeaways From Disney's Earnings Call
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After Disney (DIS) reported a net loss for its fiscal second quarter despite returning a surprise profit in its direct-to-consumer entertainment segment and gave weak guidance for the third quarter, CEO Bob Iger and other executives joined the company's earnings call to discuss its streaming segment, expectations around ESPN+, the company's plans around Iger's succession, and Disney's parks strength as well as cruise business opportunities.

Iger highlighted in the call that the entertainment portion of the company's streaming business "achieved an important milestone" of profitability in the quarter.

Disney reported an operating profit of $47 million in its direct-to-consumer entertainment segment, which consists of Disney+ and Hulu, compared to a $587 million loss in the year-ago period. As a whole, its streaming businesses including the ESPN+ Sports segment returned an $18 million loss, narrowing significantly from the $659 loss recorded in the same period a year prior.

However, Iger noted that the company is "anticipating a softer third quarter, due in large part to the seasonality of our Indian sports offerings." Disney CFO Hugh Johnston said that Disney doesn't expect to see core Disney+ subscriber growth in the third quarter, but anticipates subscriber growth will return in the fourth quarter.

Iger reiterated that the combined streaming businesses are still on track to return a profit by the end of the 2024 fiscal year.

When asked about Disney's sports push, with Disney set to add some live games and studio shows from ESPN to Disney+ by the end of 2024, Iger said he feels "very bullish about it."

Iger said the company has "locked up long-term deals with significant sports organizations that includes college football championships, all the NCAA championships, and the NFL." He also said he's optimistic that Disney is "going to end up with an NBA deal that will be long term."

"There's really nothing like ESPN in the sports world and their hand is solid for the next decade," he said.

When asked about the company's plans to appoint a successor for Iger, he said that "the board is heavily engaged in the process and has appointed a succession planning committee that is meeting on a regular basis to not just discuss but also to manage the process."

"I'm confident that they will choose the right person at the right time and that to the extent that I can [I] will participate in the smooth transition," Iger said.

Iger, who is 73 years old, was reappointed to serve as CEO in 2022 after previously holding the role from 2005 to 2020. Disney's leadership has faced recent challenges from activist investors, but managed to stave them off so far, resolving its latest proxy battle at its most recent shareholder meeting.

Iger reported that Disney's second-quarter results were driven in large part by its experiences segment as well as the streaming business.

Johnston said operating income for Disney's parks and experiences increased by 13% year-over-year, with strong international parks growth driven by the Hong Kong Disneyland Resort, while Walt Disney World and the cruise business both contributed to domestic growth at Disneyland.

He noted that the company is "seeing some evidence of a global moderation from peak post-Covid travel" and pressure from wages, though he added that "there are lots of opportunities to continue to grow attendance, both domestically and internationally," specifically in the cruise business.

The cruise business "has an enormous number of opportunities" the CFO said, adding that "that is why [the company is] leaning more heavily into that business" and "expect[s] to get excellent returns."

Disney shares closed 9.5% lower at $105.39 Tuesday. However, even with Tuesday's losses, shares have gained over 16% since the start of the year.

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U are next to testify
We Need To Increase VAT Rate — Tax Expert, Taiwo Oyedele
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The presidential committee on fiscal policy and tax reforms says there is a need to increase the value-added tax (VAT) rate, The Cable is reporting.

Taiwo Oyedele, chairman of the committee, spoke on Monday while disclosing the VAT revenue-sharing formula would be reviewed. He spoke at a policy exposure and impact assessment session organised by the committee.

Nigeria’s VAT rate is currently 7.5 percent. Oyedele also said the committee has proposed reviewing state and local governments’ share of VAT revenue to 90 percent. According to section 40 of the VAT Act, the federal government gets 15 percent of the tax revenue, states share 50 percent, and local governments share the balance of 35 percent.

However, Oyedele said the committee is recommending reducing the federal government’s share from 15 percent to 10 percent. “We are proposing that the federal government’s portion should be reduced from 15 percent to 10 percent. States’ portion will be increased but they would share 90 percent with local governments,” he said.

Oyedele said the committee proposed adjusting the sharing formula for VAT because it is a tax of the states. “In 1986, we had sales tax collected by states. The military came up with VAT in 1993 and stopped sales tax so they said it would collect VAT and return 15 per cent as cost of collection and that is the 15 per cent charged today came about. But we think it is too much,” he said.

The tax expert added that the burden of VAT should be on the ultimate consumer. “So we must make it transparent and neutral and this is what over 100 countries where they have VAT are doing. Nigeria’s economy is more than 50 percent in services and if I just stop at this, many states will be broke because VAT collection will go down by more than 50 percent and it won’t even fly. [Swipe]

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S&P 500 Gains And Losses Today: Builders FirstSource Falls Amid Lower Margins
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Major U.S. equities indexes were mixed and little changed on Tuesday.

The S&P 500 edged 0.1% higher, keeping a streak of positive sessions dating back to the middle of last week amid renewed anticipation that the Federal Reserve could lower interest rates in the next few months. The Dow also eked out a gain of around 0.1%, but the tech-heavy Nasdaq slipped 0.1%.

Shares of FMC Corp. (FMC) led the S&P 500, popping 9.5% after the agricultural sciences company issued better-than-expected full-year revenue guidance.

The provider of insecticides and other agricultural chemicals expects new products to drive robust revenue growth, the company said. FMC is also positioned to benefit from lower input costs, reduced interest expenses, and cost-saving initiatives.

International Flavors and Fragrances (IFF) shares jumped 6.4%. The stock soared after the provider of ingredients for food, beverage, and personal care products reported better-than-expected first-quarter revenue and earnings per share (EPS).

Volume growth and productivity gains helped drive the strong performance, and the company highlighted successful measures to optimize its portfolio, including the divestment of its cosmetics ingredients business.

Shares of Kenvue (KVUE), the consumer health products business that completed its spinoff from Johnson & Johnson (JNJ) last year, gained 6.4% after the company's first-quarter profits exceeded expectations.

Home to Tylenol, Listerine, and other well-known brands, Kenvue achieved strong sales growth in its self-care and essential care segments. The firm also announced plans to cut around 4% of its workforce as it aims to reduce costs.

Shares of Builders FirstSource (BLDR) posted the steepest losses of any S&P 500 stock, tumbling 19.1% in the wake of the building materials supplier's first-quarter earnings report.

Although quarterly sales topped forecasts, net income fell short of estimates, and a shift in product mix toward lower-margin products contributed to a year-over-year drop in gross profit margin. Builders FirstSource also faces challenges related to higher mortgage rates limiting affordability and softness in the multi-family housing market.

Disney (DIS) shares dropped 9.5% on Tuesday after the entertainment giant reported a quarterly net loss, reflecting the impact of hefty restructuring costs and other impairment charges.

Despite reporting a surprise profit in its direct-to-consumer entertainment segment, Disney provided a weak growth outlook for subscriptions and experiences. It does not expect core subscriber growth for the Disney+ streaming service during the current quarter.

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Crocs Stock Jumps On Record Revenue As Demand For Its Footwear Kicks Up Sales
~1.2 mins read

Crocs (CROX) shares gained more than 7% Tuesday as the footwear maker posted record sales and boosted its guidance on “robust consumer demand" for its eponymous shoe brand.

The company reported first-quarter diluted earnings per share (EPS) of $2.50, up 4.6% from the year-ago period, with revenue up 6.2% to $939 million. Both were well above analyst estimates compiled by Visible Alpha. Direct-to-consumer (DTC) revenue increased 11.8%. The company's gross margin rose to 55.6% from 53.9%.

North American sales were 9% higher at $383 million, while international sales soared 21.3% to $361 million.

Sales for the Crocs brand gained 14.6% to $744 million. However, the company reported its Heydude brand sales dropped 17.2% to $195 million, and CEO Andrew Rees said that because of that, the company was reducing the brand’s revenue expectations for the rest of the year. It now expects Heydude sales to decline 8% to 10%. In February, the company had predicted they would be flat to slightly up.

Despite that change, the company now sees full-year adjusted EPS in the range of $12.25 to $12.73, compared with the previous outlook of $12.05 to $12.50.

Crocs also announced Susan Healy would become its new CFO beginning June 3. She’ll replace Anne Mehlman, who was recently appointed president of the Crocs brand. Healy previously served as CFO at auto auction site Insurance Auto Auctions (IAA).

Crocs shares finished 7.8% higher at $136.49 Tuesday, and have added about 46% for 2024 so far.

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Gold Price On May 7: Rate Falls With Fed Comments, Consumers In Focus
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The spot price of gold was 0.4% lower at $2,315.52 per ounce as of 3 p.m. ET Tuesday as the U.S. dollar gained on the pound and yen, with comments by several Federal Reserve officials that could give hints as to the future of interest rates in focus.

Minneapolis Federal Reserve Bank President Neel Kashkari said Tuesday it could be likely that interest rates would linger at their current 23-year high levels for “an extended period of time.” Kashkari indicated he expects inflation to move “sideways” for a while, pushing the Fed to hold rates steady. Worries about when the Fed might cut rates could negatively impact the price of gold.

Federal Reserve Bank of Richmond President Thomas Barkin said yesterday he sees the U.S. economy slowing, which should ease inflation further. He added that recent volatility in economic data supported the Fed’s decision to take its time on lowering borrowing costs.

Speeches are scheduled this week from a number of other Fed speakers as well. In addition, the University of Michigan Consumer Sentiment Index will be released on Friday, giving a glimpse of how consumers feel about inflation and where it’s heading. 

Despite Tuesday’s slide, the price of gold remained close to 12% higher for 2024 so far.

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