Disney Posts Higher Earnings, Buys Stake in Sports Streaming Company

Bob Iger - Getty - H 2016
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Bob Iger - Getty - H 2016

"The studio is having an absolutely phenomenal year," CEO Bob Iger said, referencing an average box-office total of nearly $800 million.

Disney came in slightly ahead of estimates for its fiscal third quarter, climbing 12 percent in the year-over-year to earnings of $1.62 per share on revenue of $14.28 billion, the company on Tuesday reported after the market's close.

The Burbank-based media conglomerate was expected to post earnings of $1.61 a share on $14.152 billion, according to the Thomson Reuters consensus estimate. In second-quarter 2016, the company missed estimates for the first time in 13 quarters, spanning a full five years.

Disney also on Tuesday confirmed its rumored 33 percent stake in MLB Advanced Media, the streaming video division of Major League Baseball, which is valued at about $3 billion. The service will provide the infrastructure for an over-the-top sports distribution service.

"Under the terms of the transaction, Disney will pay $1 billion in two installments, now and in January 2017, and has the option to acquire majority ownership in the coming years," the company said in a statement.

CEO Bob Iger was enthusiastic about the acquisition during the third-quarter conference call with investors.

"They have an industry-leading platform," he said. "What they've got is really robust."

Iger added that the deal includes sports IP that MLB Advanced Media has previously licensed. Disney will deploy its own sports content from ESPN and ABC Sports on the platform, as well.

The purchase was welcome news for analysts.

"Today many consumers double-dip on traditional pay TV and OTT services and we think a major reason is most sports are only available on pay TV," Goldman Sachs analyst Drew Borst wrote in a July 8 note to investors. "In other words, sports is the glue that holds the bundle together, in our view."

Box-office estimates for the movie studio had been lowered slightly on poor showings for anticipated hits like the Johnny Depp vehicle Alice Through the Looking Glass and the Steven Spielberg-directed The BFG, based on the book by children's author Roald Dahl, but strong turnout for Zootopia, Captain America: Civil War, The Jungle Book and Finding Dory more than offset declines.

"They over-delivered on film and parks and under-delivered on television networks and consumer goods," Needham & Co. analyst Laura Marin told The Hollywood Reporter.

Disney's new theme park in Shanghai opened late in the third quarter. Iger said that local awareness about the park was "nearly universal."

Disney shares are down around 12 percent year to date to $95.61 at close of trading Monday from $109.75. In the same period, the Dow Jones Industrial Average has climbed 5 percent.