Disney Beats Quarterly Profit Expectations Despite Revenue Miss

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Disney CEO Bob Iger

Bob Iger also dismissed speculation about a run for president, but didn't rule it out.

Disney on Tuesday posted mixed quarterly financial results, beating the expectations of analysts on the bottom line though not on the top line.

Disney said it earned $1.50 a share in its fiscal second quarter, while it was expected to earn $1.41 per share. Revenue was $13.36 billion, while Wall Street was looking for $13.45 billion.

While Wall Street expected big things from the film studio after Beauty and the Beast opened strong in March prior to the close of the quarter, it is anxious about the media networks business due to declining subscribers at ESPN.

Analysts expected revenue at the studio to come in at $1.99 billion and it hit $2.03 billion. Analysts were looking for $5.99 billion at media networks and Disney reported $5.95 billion in that segment.

ESPN recently cut 100 on-air employees in an effort to save money amid rising sports-licensing fees. It pays about $2 billion annually for the right to broadcast 17 NFL games each year, for example.

On a conference call with analysts, Disney CEO Bob Iger said the company has responded quickly to the "early signs of a shift" in the sports-cable industry by launching digital initiatives.

"Launching a new platform without ESPN is very challenging," Iger said. He also asked analysts during the earnings call to "give us credit" for disclosing sub losses at ESPN last year.

Iger noted that ESPN's TV audience rose 15 percent year-over-year and the digital offerings added another 10 percent. Revenue at cable networks, though, was down 3 percent quarter-over-quarter and operating income was also down 3 percent due to the performance of ESPN.

"The decrease at ESPN was due to higher programming costs, partially offset by affiliate and advertising revenue growth," Disney said in its earnings release. Specifically, the conglomerate blamed the timing of College Football Playoff bowl games and rate increases for NBA games.

On the broadcast side, revenue was up 3 percent and operating income grew by 14 percent, with the shows Iron Fist and How to Get Away With Murder getting the credit.

Beyond Beauty and the Beast, Disney's studio entertainment segment benefited from Blu-ray titles Moana and Doctor Strange. 

Revenue at parks and resorts climbed 9 percent to $4.3 billion and operating income there surged 20 percent to $750 million. Iger said Shanghai Disney Resort, which opened last year, has outperformed expectations and will soon boast its 10 millionth guest.

The consumer products and interactive media segment saw an 11 percent decline in revenue to $1.06 billion but a 3 percent increase in operating income to $367 million. The revenue decline was due to smaller sales of merchandise based on the Star Wars franchise and Frozen.

Disney shares rose 1 percent on Tuesday to $112.06, but were down 2 percent after the closing bell.

Also on Tuesday, Iger dismissed speculation about a run for president, but didn't rule it out. "I'm not spending much time thinking about what I'm going to do next," he said in a CNBC interview.

Iger also assured analysts there'd be a "smooth transition" to a new CEO when his contract expires on July 2, 2019, just as his transition was smooth when he took over from Michael Eisner, despite a lot of drama at the end of Eisner's tenure.

"Frankly, it was seamless," Iger said of taking the reins from Eisner 12 years ago. "It worked."

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