The Walt Disney Company Exceeds Expectations With 3rd Quarter Earnings

Disney said its earnings rose 4.6% in the latest quarter, helped by recent box-office hits and the opening of Shanghai Disney in mid-June.

Separately, Disney said it is acquiring a one-third stake in BAMTech, a technology services and video-streaming company formed by Major League Baseball. As part of the deal, BAMTech was separated from MLB’s broader digital business, MLB Advanced Media.

Disney agreed to pay $1 billion in two installments, now and in January, and has the option to acquire majority ownership. BAMTech powers direct-to-consumer streaming services and apps for a number of companies, including HBO and ESPN, and serves nearly 7.5 million total paid subscribers to all its clients’ streaming products.

As for the third quarter ended July 2, Disney said revenue at its film division jumped 40% to $2.85 billion. Results benefited from strong performances from Pixar Animation Studios sequel “Finding Dory,” Marvel Studios superhero epic “Captain America: Civil War,” the live-action version of “The Jungle Book” and animated animal comedy “Zootopia,” all of which offset weak results from the big-budget flop “Alice Through the Looking Glass.”

While Disney has had a string of movie hits, analysts have remained focused on Disney’s cable-television business. A year ago, Disney disclosed “some subscriber losses” at ESPN, setting off concerns about the future of the sports powerhouse in an era of cable cord-cutting and skinny bundles.

Revenue in Disney’s media networks segment increased 2.4% to $5.91 billion. In the segment’s cable-network business, which includes ESPN, revenue grew 1.4% to $4.2 billion. 

BAMTech is expected to work with ESPN to launch a new ESPN-branded multisport streaming service, with content provided by both businesses, including live regional, national and international sporting events. ESPN said the new service wouldn't include content from its pay-TV channels and that it would announce further details in the months ahead.

Disney’s investment in BAMTech will help step up growth of its video platform, while BAMTech will be a key partner in over-the-top efforts for Disney’s ABC Television Group and ESPN.

Following the deal, the National Hockey League received a minority interest in BAMTech, as the result of a previous agreement.

Meanwhile, Disney’s parks and resorts segment recorded revenue growth of 6% to $4.38 billion. During the quarter, Disney’s newest resort opened to long lines in Shanghai. Also in focus will be any potential impact that the Zika virus and the recent nightclub shooting in Orlando has had on attendance at Disney World.

Operating earnings in the parks and resorts segment rose 7.8% as growth in its domestic business was partly offset by a decline in its international business. The weaker international results stemmed partly from pre-opening costs for Shanghai Disney along with weaker attendance and higher costs at Disneyland Paris.

At its domestic resorts, higher operating earnings stemmed from lower costs and higher spending by guests—driven by higher ticket prices at Disney’s theme parks and cruise lines—that was partly offset by a decline in the number of visitors. The company said the latest period was hurt by the absence of the Easter Holiday, which fell in the previous quarter this year.

Over all for the third quarter, Walt Disney reported a profit of $2.6 billion, or $1.59 a share, up from $2.48 billion, or $1.45 a share, a year earlier. Excluding certain items, adjusted per-share earnings rose to $1.62 from $1.45. 

Revenue increased 9% to $14.28 billion.

Analysts polled by Thomson Reuters expected per-share profit of $1.61 and revenue of $14.15 billion.

Source: Wall Street Journal

Banner Photo Credit: Disney