DVDs drive Dis net past expectations
EmptyTalking automobiles, quirky swashbucklers and singing teenagers kept the Walt Disney Co. firing on all cylinders during its first quarter, allowing the firm to post net income that more than doubled compared with the same frame a year ago.
Disney's report, which came after Wall Street's closing bell, validated investors' enthusiasm for the company, shares of which rose during the regular session and then pushed their way to a 52-week high in after-hours trading.
Net income rose from $734 million in the first quarter last year to $1.7 billion. Revenue grew 10% to $9.7 billion.
Disney posted "outperformance by nearly all segments," Goldman Sachs analyst Anthony Noto said, driven primarily by the film studio.
While the studio entertainment division grew revenue 29% to $2.6 billion, operating income soared from $128 million a year ago to $604 million, mostly because of massive DVD sales of "Cars," "Pirates of the Caribbean: Dead Man's Chest" and "The Little Mermaid Platinum Edition."
Those DVD titles significantly outperformed last year's first-quarter crop, which included "Herbie: Fully Loaded," "Cinderella Platinum Edition" and "Howl's Moving Castle."
Strength in DVDs offset a bit of theatrical weakness, Disney executives said, where "Deja Vu" and "Santa Clause 3: The Escape Clause" competed unsuccessfully against last year's "The Chronicle of Narnia: The Lion, the Witch and the Wardrobe."
Disney's first quarter also benefited from the sale of its stakes in Us Weekly magazine and E! Entertainment, which brought in sales of $1.1 billion and helped the company beat analysts' revenue and profit expectations by a wide margin.
Its media networks division posted a 6% gain in revenue to $3.9 billion and a 24% rise in operating income to $750 million.
On the cable side, international subscriber growth for Disney Channel helped, as did big DVD sales for "High School Musical."
CFO Tom Staggs said during a conference call that the decision to move "Monday Night Football" from ABC to cable's ESPN was "the biggest driver of the increase in profitability for the quarter for the broadcasting business" because it allowed for the sale of more ads at ABC.
The higher programming costs related to "MNF" on ESPN, though, wiped out gains at ESPN from rate increases and bigger ad sales.
On the broadcast side, higher political advertising and DVD sales of "Grey's Anatomy" and "Lost" boosted the bottom line, while costs associated with Disney's mobile phone service did not.
"These results are particularly gratifying given the great year we had in 2006 and are another clear sign our strategy is driving growth and creating shareholder value," Disney president and CEO Robert Iger said.
The parks and resorts unit posted revenue that climbed 4% to $2.5 billion and operating income that was up 8% to $405 million, each a significant accomplishment, Staggs said, given that the division was up against tough comparisons because of last year's 50th anniversary celebration.
Staggs also said that "the early going at Hong Kong (Disneyland) has been more challenging than we had hoped."
The only unit seeing declines was consumer products, where revenue fell 6% to $692 million and operating income dropped 13% to $235 million despite strong sales of merchandise related to "Cars" and "Dead Man's Chest." Disney said that Buena Vista Games was the laggard, hurt by tough comparisons with popular games last year based on "Chicken Little" and "Narnia."