A cooler summer for the movie studio hurt Disney’s third-quarter earnings, though net income and revenue reported Wednesday still showed single-digit increases.
The Mouse House’s results did not reveal major vulnerability in terms of consumer confidence, despite spiking fuel prices, airline woes and the economic malaise. The parks and resorts unit notched modest gains in revenue and profit — a better showing than some Wall Streeters expected.
Overall revenue hit $9.2 billion, up 2% from $9 billion in the year-earlier period, with net income up 9% to $1.3 billion. Free cash flow declined 15% to $583 million.
Mouse House stock tacked on more than 2% Wednesday to $31.67. Earnings were released after the close of trading. Shares sold off a bit in after-hours trading as some of the more sobering aspects of the report were digested.
With only about 20% of company revenues derived from advertising, on the low end of the scale in the media sector, Disney hasn’t seen its stock pummeled as Viacom’s was the day after its earnings showed some ad weakness.
Walt Disney Studios, however, was saddled with “The Chronicles of Narnia: Prince Caspian” in the period ended June 28 instead of the previous year’s “Pirates of the Caribbean: At World’s End.” It saw operating income plunge 49% to $97 million on a 19% slide in revenue, which totaled $1.4 billion.
“Wall-E” opened a day before the end of the quarter, so its performance compared with that of “Ratatouille” will have to wait until the fourth-quarter report.
The weakness in the movie studio was counterbalanced by other less volatile businesses. Robin Diedrich, a media analyst with Edward Jones, which does not have shares in Disney, affirmed her buy rating on the company and shrugged off the worries about film comparisons or ad sales.
“You have a management team focused on the right things,” she said. “You have to take the film business with a grain of salt. It’s always a little lumpy. That’s where Disney’s diversity comes in.”
The Screen Actors Guild standoff, noted chief exec Robert Iger, “is not having a particularly damaging impact on our business because we have decided to move forward with a number of our productions and address any issues later as they arise.”
He added that concessions to SAG by the studios are highly unlikely given that the Writers Guild of America, Directors Guild of America and the American Federation of Television & Radio Artists all signed off on certain new-media provisions that SAG rejected. That would make it tough to give SAG special treatment. Even so, “a work stoppage is unlikely,” he said.
The media networks division, which includes the red-hot ESPN and Disney Channel, saw a 9% rise in operating net to $1.5 billion, as scatter ad sales gains in the mid- to upper-single digits offset softness in some ad categories like automotive, financial services and consumer electronics.
The WGA strike dented ABC’s ratings and helped send broadcast operating net income down 11%, though it also helped keep pilot costs down in the quarter.
Consumer products had a stout 20% gain in revenue, to $2.3 billion, mostly due to the acquisition of Disney Stores in North America. Operating net dropped 4% to $113 million.
Per-capita spending at Disney theme parks was down 2%, but hotel revenue rose 5%, while overall bookings were flat.
Rising commodity prices have not been a major concern at parks and resorts, Iger said, since they comprise just 4% of operating costs. Increases in wholesale costs of between 7% and 10% for some goods have made Disney “mindful” of market turmoil, but the damage is slight.