The market is overreacting to the departure of Disney's CFO. Here's why

Published Fri, Jun 16 20231:40 PM EDT

Shares of club holding Walt Disney (DIS) came under pressure Friday after the company announced longtime CFO Christine McCarthy will step down at the end of the month — and we think the 1.4% decline is an overaction by the market. Disney said McCarthy will take a family medical leave of absence , with executive Kevin Lansberry stepping into the chief financial officer role on an interim basis from July 1. Typically, news of a CFO unexpectedly leaving a company is a red flag because it raises questions about how the business is performing. It can be a warning sign of underlying problems. But McCarthy's departures is not an example of a CFO fleeing because the business is doing poorly. McCarthy's leave is entirely due to personal circumstances that have nothing to do with the company and its performance, Jim Cramer confirmed with Disney. To be fair, Disney is still not hitting it out of the park as of yet. The turnaround strategy spearheaded by CEO Bob Iger is in the infancy stages. There is no quick fix because costs spun out of control under former CEO Bob Chapek. Iger has implemented a $5.5 billion cost-savings plan, which includes the recent elimination of 7,000 jobs. In addition to headcount, Disney is shrinking the size of its content library to trim its cost structure. Earlier this month, the company said it will incur a $1.5 billion impairment charge in the June quarter due to the removal of content from its streaming services. Another part of Iger's plan has been to reorganize the corporate structure and make creative leaders responsible for all major decisions — including what content is made, as well as how it's distributed and monetized. This decision should reverse the creative destruction and under-monetization of content that occurred during Chapek's tenure. The turnaround here will not be immediate, and we will have to be patient through a couple more difficult quarters before Disney sees the benefits of its cost-reduction plan. Disney has said it expects to see an impact from those efforts on its financial results in fiscal year 2024. Moreover, Disney has a host of potential candidates at its disposal to succeed Iger, and the appointment of a new CEO could be another positive catalyst for the stock. Despite the near-term challenges, we are steadfast in our belief that when we look back at today one year from now, we'll ask ourselves how shares of this iconic media-and-entertainment giant could have traded as low as $92 apiece? (Jim Cramer's Charitable Trust is long DIS. 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.