Disney Falls Short of Earnings Expectations Despite 'Star Wars'
ESPN loses subscribers and ad revenue falls, but the sports network manages to show a gain in operating income due to lower costs.
The Walt Disney Co. fell short of quarterly financial expectations even after garnering a massive haul from Star Wars: The Force Awakens, the company said Tuesday, causing the stock to fall 7 percent after the closing bell.
Also tucked into the earnings report was the fact that Disney discontinued its self-published video games business, including its once-popular Disney Infinity franchise, and took a $147 million charge for doing so. The strategy going forward will be to license its properties to other game makers. The move has cost 300 people their jobs.
The conglomerate reported $1.36 per share in earnings after some items and revenue of $13 billion. Disney was expected to show 12 percent profit growth to $1.39 a share on revenue growth of 6 percent to $13.2 billion.
On a conference call with analysts, CEO Bob Iger said he has no intention of extending his employment contract beyond its expiration in June 2018. The topic of succession at Disney has been an important one for shareholders since Iger's heir apparent, COO Thomas Staggs, said last month he would step down.
The latest Star Wars pic has earned $2.1 billion worldwide and was expected to be a major driver in the second quarter, along with Zootopia, while money from hit films The Jungle Book and Captain America: Civil War will show up the next time Disney reports its financials.
While the film segment was expectedly stellar this time around, analysts will more likely be focused on ESPN subscriber numbers, which have stagnated of late and has hindered the stock.
Indeed, Disney said ESPN lost subscribers during the quarter, though it didn't say how many, and it also showed a decrease in ad revenue. ESPN did manage a gain in operating income due to lower casts and affiliate revenue, though.
While revenue at broadcasting rose 3 percent, revenue at cable sunk 2 percent. The whole of media networks, Disney's largest segment, showed flat revenue at $5.8 billion and operating income that rose 9 percent to $2.3 billion.
Film studio revenue surged 22 percent to $2.1 billion as Star Wars and Zootopia compared very favorably to last year's Big Hero 6 and Into the Woods. Studio operating income was up 27 percent to $542 million.
Parks and resorts revenue rose 4 percent to $3.9 billion while operating income was up 10 percent to $624 million. Consumer products revenue fell 2 percent to $1.2 billion and operating income fell 8 percent to $357 million.