The CEOs of two Club holdings spoke to CNBC on Thursday: Walt Disney Co. ‘s (DIS) Bob Chapek and Devon Energy’s (DVN) Rick Moncrief. Here what you need to know: Disney CEO Disney’s third-quarter results, released Wednesday night , show a company that’s pretty much firing on all cylinders as its highly profitable theme park business booms and the entertainment giant invests in growing its streaming services. Chapek told CNBC he’s seeing no signs of a slowdown at Disney’s theme parks, rebuffing Wall Street worries that pent-up demand accumulated during the pandemic could be weakening as inflation squeezes consumer budgets overall. “For all visibility we have into the future, we’re not seeing any softening of our demand. We’re really, really pleased with that. I know there’s been a lot of concerns about what this would mean with travel and gas prices and airline ticket prices, but we’re seeing no softening at all of our demand, and we think this bodes well. Remember, that with the lead time for international travel, we haven’t even seen our international travel rebound yet. The numbers that we’re posting right now are largely on our domestic audience. Once [international travel] comes back, I think that’s going to put more demand into our pipeline and give us the opportunity to leverage that as well.” The demand picture at theme parks being this robust does raise questions about whether Disney will raise prices, which theoretically would help the company’s bottom line. Chapek said Disney has “no plans” to announce Thursday about prices, but he repeated multiple times that the company is keeping an eye on attendance. Earlier this year, Disney raised the base prices of multi-day passes . “We operate with a surgical knife here, and we’re at a level of sophistication with our pricing that not only does it maximize shareholder value but it enables us to provide a value to guests no matter what time of the year they want to come,” Chapek said, likely referring to Disney’s date-based system that leads to higher ticket prices on days that are historically more popular. “It’s all up to the consumer,” Chapek added later, when CNBC asked specifically if another increase could be in the works. “If consumer demand keeps up, we act accordingly. If we see a softening, which we don’t think we’re going to see, we can act accordingly as well. We’re very flexible.” Prices for the company’s streaming services definitely are going up , though, and a new ad-supported model for its flagship Disney+ offering is rolling out later this year. Disney made the announcement Wednesday. Beginning Dec. 8 in the U.S., an ad-supported tier of Disney+ will be $7.99 per month, which is currently how much the service costs without commercials. Disney+ without ads will cost $10.99 a month, a 38% increase. The price hikes — which also are occurring at different magnitudes at both Hulu and ESPN+ — come as Disney’s streaming unit continues to post large quarterly losses as it invests in new content. They should help dampen the impact those investments are having on Disney’s earnings, as will any additional revenue provided by Disney+ advertising. Netflix, one of Disney’s key streaming rivals, also is preparing to launch an ad-supported version of its service. While there are some questions about how successful Netflix’s first ad venture will be at first, Chapek told CNBC he’s confident in this move for Disney+. “No one has the experience that we do because of our Hulu experience,” Chapek said, referring to the fact Hulu has long had an ad-supported version along with a commercial-free offering; Hulu is profitable. Disney+ and ESPN+, by contrast, are losing money. (Note: Disney is Hulu’s majority owner, while CNBC parent Comcast (CMCSA) owns the remaining 33%.) “This should be margin accretive as we move over to the ad business,” Chapek added. “One only has to look at the average per sub advertising revenue that we get on Hulu and think about what that could mean on a Disney+ standpoint particularly with the opening price point for Disney+ with ads. So, we believe it will be no worse than neutral. I think it’s got some possibilities. … I think you’ll see great results coming out of it.” Hulu’s average monthly revenue per paid subscriber was $12.92 in the most recent quarter, compared with $6.27 for Disney+ in the U.S. and Canada. Hulu is not available outside the U.S. Devon Energy After reporting strong quarterly results last week, Devon Energy on Tuesday announced it was spending $1.8 billion in cash to buy Validus Energy, an exploration and production company that operates in Texas’s Eagle Ford basin. While the Delaware Basin in West Texas remains Devon’s primary production site, Muncrief told CNBC the addition of privately held Validus will enhance the company’s existing operations in the Eagle Ford region. Eagle Ford accounted for roughly 6.5% of Devon’s total production last year, measured by thousand barrels of crude oil equivalent, according to its annual report. The Delaware Basin, for comparison, was around 65% of production. “We’re very pleased with the Validus transaction. We basically bought the company for two times cash flow. It’s a very accretive transaction for us. It’s a great fit. The industrial logic, if you’d like to say, it’s adjacent acreage. It’s an area we have some expertise in,” Muncrief said, referring to the fact Devon’s Eagle Ford operations are located in DeWitt County, Texas, which is right next to Karnes County, where Validus has its wells. “We think those synergies at the asset level will help drive our unit cost down, so it checks a lot of boxes for us. We took cash off the balance sheet we were sitting on and redeployed that into a very accretive transaction. That’s going to be very meaningful, I believe, for shareholders.” Muncrief also discussed his outlook on the price of oil, which has come down from its recent highs around $120 per barrel in June. While West Texas Intermediate crude’s current levels around $90 per barrel is well above Devon’s breakevens, some investors are concerned that further price declines could weaken the company’s cash flow generation. Remember, Devon then returns a large chunk of that cash to shareholders via its fixed-plus-base dividend and share repurchase program, which is a key reason we own the stock, along with it helping to hedge our portfolio against inflation. Muncrief said he sees fundamental reasons for crude prices to hold up despite concerns of a macroeconomic slowdown. “From our perspective, we’ve seen crude on the WTI side, it’s hung in there around that $90 [per barrel range]. I think we’re a little bit above that today. But I think you have to step back and look. I do think we’re going to continue to see plus or minus 1% — maybe even a little bit more than that — global oil demand growth this year. With economies like China reopening and others, we’ll continue to see that growth, that demand, be I think very solid, very constructive. You have to recall that OPEC is having a very challenging time meeting their quotas. … You see discipline here in the U.S. We are going to grow here domestically probably plus or minus 800,000 barrels a day from a year ago. So, U.S. producers are stepping up and doing that, but we still think supply and demand balances are quite tight and it’s going to be that way for a while.” (Jim Cramer’s Charitable Trust is long DIS and DVN See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Bob Chapek, CEO of Walt Disney
Patrick T. Fallon | Bloomberg | Getty Images
The CEOs of two Club holdings spoke to CNBC on Thursday: Walt Disney Co.’s (DIS) Bob Chapek and Devon Energy’s (DVN) Rick Moncrief.
Here what you need to know:
The CEOs of two Club holdings spoke to CNBC on Thursday: Walt Disney Co. ‘s (DIS) Bob Chapek and Devon Energy’s (DVN) Rick Moncrief. Here what you need to know: Disney CEO Disney’s third-quarter results, released Wednesday night , show a company that’s pretty much firing on all cylinders as its highly profitable theme park business booms and the entertainment giant invests in growing its streaming services. Chapek told CNBC he’s seeing no signs of a slowdown at Disney’s theme parks, rebuffing Wall Street worries that pent-up demand accumulated during the pandemic could be weakening as inflation squeezes consumer budgets overall. “For all visibility we have into the future, we’re not seeing any softening of our demand. We’re really, really pleased with that. I know there’s been a lot of concerns about what this would mean with travel and gas prices and airline ticket prices, but we’re seeing no softening at all of our demand, and we think this bodes well. Remember, that with the lead time for international travel, we haven’t even seen our international travel rebound yet. The numbers that we’re posting right now are largely on our domestic audience. Once [international travel] comes back, I think that’s going to put more demand into our pipeline and give us the opportunity to leverage that as well.” The demand picture at theme parks being this robust does raise questions about whether Disney will raise prices, which theoretically would help the company’s bottom line. Chapek said Disney has “no plans” to announce Thursday about prices, but he repeated multiple times that the company is keeping an eye on attendance. Earlier this year, Disney raised the base prices of multi-day passes . “We operate with a surgical knife here, and we’re at a level of sophistication with our pricing that not only does it maximize shareholder value but it enables us to provide a value to guests no matter what time of the year they want to come,” Chapek said, likely referring to Disney’s date-based system that leads to higher ticket prices on days that are historically more popular. “It’s all up to the consumer,” Chapek added later, when CNBC asked specifically if another increase could be in the works. “If consumer demand keeps up, we act accordingly. If we see a softening, which we don’t think we’re going to see, we can act accordingly as well. We’re very flexible.” Prices for the company’s streaming services definitely are going up , though, and a new ad-supported model for its flagship Disney+ offering is rolling out later this year. Disney made the announcement Wednesday. Beginning Dec. 8 in the U.S., an ad-supported tier of Disney+ will be $7.99 per month, which is currently how much the service costs without commercials. Disney+ without ads will cost $10.99 a month, a 38% increase. The price hikes — which also are occurring at different magnitudes at both Hulu and ESPN+ — come as Disney’s streaming unit continues to post large quarterly losses as it invests in new content. They should help dampen the impact those investments are having on Disney’s earnings, as will any additional revenue provided by Disney+ advertising. Netflix, one of Disney’s key streaming rivals, also is preparing to launch an ad-supported version of its service. While there are some questions about how successful Netflix’s first ad venture will be at first, Chapek told CNBC he’s confident in this move for Disney+. “No one has the experience that we do because of our Hulu experience,” Chapek said, referring to the fact Hulu has long had an ad-supported version along with a commercial-free offering; Hulu is profitable. Disney+ and ESPN+, by contrast, are losing money. (Note: Disney is Hulu’s majority owner, while CNBC parent Comcast (CMCSA) owns the remaining 33%.) “This should be margin accretive as we move over to the ad business,” Chapek added. “One only has to look at the average per sub advertising revenue that we get on Hulu and think about what that could mean on a Disney+ standpoint particularly with the opening price point for Disney+ with ads. So, we believe it will be no worse than neutral. I think it’s got some possibilities. … I think you’ll see great results coming out of it.” Hulu’s average monthly revenue per paid subscriber was $12.92 in the most recent quarter, compared with $6.27 for Disney+ in the U.S. and Canada. Hulu is not available outside the U.S. Devon Energy After reporting strong quarterly results last week, Devon Energy on Tuesday announced it was spending $1.8 billion in cash to buy Validus Energy, an exploration and production company that operates in Texas’s Eagle Ford basin. While the Delaware Basin in West Texas remains Devon’s primary production site, Muncrief told CNBC the addition of privately held Validus will enhance the company’s existing operations in the Eagle Ford region. Eagle Ford accounted for roughly 6.5% of Devon’s total production last year, measured by thousand barrels of crude oil equivalent, according to its annual report. The Delaware Basin, for comparison, was around 65% of production. “We’re very pleased with the Validus transaction. We basically bought the company for two times cash flow. It’s a very accretive transaction for us. It’s a great fit. The industrial logic, if you’d like to say, it’s adjacent acreage. It’s an area we have some expertise in,” Muncrief said, referring to the fact Devon’s Eagle Ford operations are located in DeWitt County, Texas, which is right next to Karnes County, where Validus has its wells. “We think those synergies at the asset level will help drive our unit cost down, so it checks a lot of boxes for us. We took cash off the balance sheet we were sitting on and redeployed that into a very accretive transaction. That’s going to be very meaningful, I believe, for shareholders.” Muncrief also discussed his outlook on the price of oil, which has come down from its recent highs around $120 per barrel in June. While West Texas Intermediate crude’s current levels around $90 per barrel is well above Devon’s breakevens, some investors are concerned that further price declines could weaken the company’s cash flow generation. Remember, Devon then returns a large chunk of that cash to shareholders via its fixed-plus-base dividend and share repurchase program, which is a key reason we own the stock, along with it helping to hedge our portfolio against inflation. Muncrief said he sees fundamental reasons for crude prices to hold up despite concerns of a macroeconomic slowdown. “From our perspective, we’ve seen crude on the WTI side, it’s hung in there around that $90 [per barrel range]. I think we’re a little bit above that today. But I think you have to step back and look. I do think we’re going to continue to see plus or minus 1% — maybe even a little bit more than that — global oil demand growth this year. With economies like China reopening and others, we’ll continue to see that growth, that demand, be I think very solid, very constructive. You have to recall that OPEC is having a very challenging time meeting their quotas. … You see discipline here in the U.S. We are going to grow here domestically probably plus or minus 800,000 barrels a day from a year ago. So, U.S. producers are stepping up and doing that, but we still think supply and demand balances are quite tight and it’s going to be that way for a while.” (Jim Cramer’s Charitable Trust is long DIS and DVN See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Bob Chapek, CEO of Walt Disney
Patrick T. Fallon | Bloomberg | Getty Images
The CEOs of two Club holdings spoke to CNBC on Thursday: Walt Disney Co.’s (DIS) Bob Chapek and Devon Energy’s (DVN) Rick Moncrief.
Here what you need to know:
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