Last month, the company delayed the release of three big-budget films, including Dune: Part Two.
Courtesy Warner Bros.
Warner Bros. Discovery
says it could take a sizable earnings hit this year, as the strikes in Hollywood roll on. The stock, however, was ticking higher Tuesday.
Last month, Warner Bros. (ticker: WBD) offered full-year guidance that assumed the strikes would be resolved by early September, the company noted in a securities filing. But as no resolution has been reached yet, it has revised its financial guidance to factor in the impact of the strikes continuing through the end of the year.
The entertainment giant is now expecting adjusted earnings before interest, taxes, depreciation, and amortization for the year to land between $10.5 billion and $11 billion, reflecting a negative impact of about $300 million to $500 million, largely due to the strikes.
While companies such as Netflix have reported near-term cost savings because of the halt on U.S. productions, the strike harms firms that produce shows for third parties, LightShed Partners co-founder Rich Greenfield told Barron’s.
“While the strike is great for saving money on production that you otherwise would have spent, and the free cash flow is great, the flip side of it is that Warner Bros. is one of the most prolific TV production studios on planet Earth,” Greenfield said. “They’re saving money on stuff that would have come out in theaters in the future, and so that helps all the cash balances, but the Ebitda keeps getting revised lower because they actually make money on TV.”
Greenfield said the latest signs point to the strike running through October or even longer.
“We’re into September, and they’re not talking,” Greenfield said. “Once you start talking, these things take a few weeks, so I think it’s hard to see how we’re not talking into Q4. And now the question just is how far into Q4. I think the studios, as you’re seeing today, are starting to write off all in 2023.”
Last month, Warner Bros. delayed the release of three big-budget films, another consequence of the strikes, The Wall Street Journal reported. The three films, Dune: Part Two, Godzilla x Kong: The New Empire, and Lord of the Rings: The War of the Rohirrim, will be released throughout next year, while the second edition of Dune initially was set to debut this November, the Journal reported.
Warner Bros. stock had risen 2.7% to $11.87 in afternoon trading.
Write to Emily Dattilo at [email protected] and Connor Smith at [email protected]
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