Disney Reports Mixed Quarterly Earnings, Stock Falls

Bob Iger - H 2015
AP Images/Invision

Bob Iger - H 2015

Disney said that its film studio did well in its fiscal third quarter despite the negative impact of 'Tomorrowland.'

Walt Disney on Tuesday reported record quarterly earnings of $2.5 billion, though it missed expectations on the top line while beating them on the bottom line.

The slight miss in revenue, according to Disney, was due to an unfavorable foreign exchange rate that impacted sales at Disneyland Paris.

Disney said that its film studio did well in its fiscal third quarter despite Tomorrowland, the $190 million movie starring George Clooney that released in May and earned just $204 million worldwide.

The conglomerate reported its financial results just after its stock touched an all-time high.

Disney said it earned $1.45 per share on $13.1 billion in revenue in its fiscal third quarter while analysts expected $1.42 in per-share profit on $13.2 billion revenue.

Shares of Disney closed fractionally higher on Tuesday at $121.69 but were sinking 4 percent after the closing bell.

Compared to the year-ago quarter, revenue was up 5 percent and net income was up 7 percent.

Broken into segments, studio entertainment saw a bigger gain in revenue than the other four, with a 13 percent rise to $2 billion. The studio saw a 15 percent increase in operating income to $472 million, with Cinderella and Avengers: Age of Ultron performing well enough to counter Tomorrowland, a movie that some analysts presume will eventually lead to a write-down.

Media networks, the biggest segment, recorded a 5 percent increase in revenue to $5.8 billion and a 4 percent gain in operating income to $2.4 billion. Within the segment, cable networks vastly outperformed broadcasting, thanks to ABC Family, ESPN and the Disney Channels. Broadcasting, in fact, recorded a 15 percent drop in operating income due to lower ad sales and higher labor costs.

Parks and resorts reported a 4 percent rise in revenue to $4.1 billion and 9 percent gain in operating income to $922 million.

Consumer products saw a 6 percent gain in revenue to $954 million and 27 percent surge in operating income to $348 million.

Interactive revenue dropped 22 percent to $208 million and broke even in terms of operating income, down from $29 million in operating income a year earlier.

In a conference call with analysts on Tuesday, CEO Bob Iger took an inordinate amount of time touting ESPN, explaining how the "must-have brand" will flourish in an environment where the rights to sports are surging and audiences are gravitating to the Internet and "skinny" bundles of cable networks.

The expanded basic cable package will remain the dominant choice among consumers for many years because it offers great value, Iger argued. He predicted that the average U.S. household will watch more TV in the future, not less.

Shortly thereafter, Christine McCarthy, the conglomerate's new CFO, suggested to the analysts on the conference call that they might want to rein in their expectations for growth at Disney's cable channels in general.

One analyst asked Disney executives to address speculation that a Star Wars land at Disneyland is in the works, but COO Tom Staggs wouldn't confirm or deny the rumor.

Email: Paul.Bond@THR.com