Disney Shares Fall After Reporting Mixed Quarterly Earnings

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Disney CEO Bob Iger

For the full fiscal year, Disney set a revenue record of $52.5 billion and scored a record $8.4 billion in net income.

Walt Disney on Thursday reported quarterly earnings of $1.20 per share and revenue of $13.51 billion, just shy of expectations on the top line but ahead of predictions on the bottom line.

Analysts had predicted that Disney would earn an adjusted $1.14 per share in its fiscal fourth quarter on revenue of $13.52 billion. Some analysts expected as much as $13.57 billion.

Disney's closely watched "media networks" segment was expected to gather $5.47 billion in revenue but it scored $5.83 billion.

For the full fiscal year, Disney set a revenue record of $52.5 billion and scored a record $8.4 billion in net income.

Wall Street is scrutinizing Disney's earnings even more than usual, in particular the results at media networks, which includes Disney's cable TV unit. Commentary and numbers associated with ESPN and other cable channels three months ago sent the entire sector into a tailspin.

That time around, Disney's shares collapsed from $120 to $90, though they recovered to $113 as of Thursday. After the closing bell, once the quarterly results were released, the shares were sinking 2 percent.

Within media networks, cable was up 12 percent in revenue to $4.24 billion while broadcasting was up 10 percent to $1.58 billion. Cable showed impressive 30 percent growth in operating income compared to just 1 percent growth for broadcasting.

Cable's growth was attributed to increases at ESPN, A&E Television Networks and the Disney Channels.

Studio entertainment revenue came in at $1.78 billion, showing zero growth for the segment, but TV and SVOD, which are also factored into the segment, led to more than double the operating income, at $530 million.

Half the company's revenue and most of its profit comes from television, but analysts are also looking ahead to Star Wars, the seventh installment of which opens on Dec. 18.

Some analysts forecast that Disney's share of Star Wars merchandise could reach $500 million in 2016 alone. Meanwhile, advance sales for the movie are setting records. Imax, for example, sold $6.5 million worth of tickets in a single day, six times more than what it sold for Hunger Games: Catching Fire over a similar timeframe.

During a conference call to discuss earnings, CEO Bob Iger reminded Wall Street that there will be three Star Wars movies released before the end of 2017 "with even more to come." He called next month's Star Wars: Episode VII — The Force Awakens "a truly epic adventure."

Disney's parks and resorts segment, its second largest after media networks, showed a 10 percent rise in revenue to $4.36 billion and a 7 percent gain in operating income to $738 million.

Consumer products was up 11 percent in revenue to $1.2 billion and up 10 percent in operating income to $416 million.

Interactive was the only segment to fall in revenue, notching $347 million, 4 percent less than a year ago, but it managed a 72 percent increase in operating income to $31 million.

During the conference call, Iger was asked if he wanted to clarify remarks he made three months earlier about slower cable growth, given the impact it had on Wall Street. He said he did not.

"There's no reason to panic," he said, while also acknowledging that there is "more competition for people's time."

Young people aren't signing up for cable TV as much as they used to, he said, but Disney will capitalize via online distribution. "The more the merrier," he said of the myriad services offered nowadays.

Along those lines, earlier on Thursday Disney said it struck a deal allowing Sony's PlayStation Vue to stream its channels, including ABC and ESPN.

Email: Paul.Bond@THR.com