Disney, the entertainment behemoth known for topping itself, did it again with its quarterly earnings report Tuesday — with profits exceeding analysts’ expectations and jumping 14% per share, powered by revenue of nearly $12.5 billion.
Disney’s earnings of $1.23 per share beat the analysts’ guess of $1.11, while the revenue figure pushed comfortably past a $12.25 billion projection and the $11.6 billion from the second quarter of 2014. The report, covering the first three months through the end of March, pushed Disney shares (DIS) to new highs of more than $113 in early trading Tuesday.
Fueling the stellar performance were the company’s parks and resorts, which saw operating income jump 24% and its consumer products, where income leapt 32%. Only its media networks (off 2%) and its film studio (down 10%) were slightly off in terms of operating income — the latter as profits from the quarter’s “Big Hero 6” could not keep pace with the 2014 blockbuster “Frozen.”
Disney chief executive Robert Iger touted “the incredible ability of our strong brands and quality content to drive results,” adding in his statement that the company’s “winning combination” was on display with its current film release “Avengers: Age of Ultron,” whose opening of $187 million represents the second best on record.
Not everything was golden in the Disney orbit. The company’s cable networks saw income drop 9% to $1.8 billion because of declines at ESPN. The company reported that programming and production costs had increased—partly due to the higher cost of college football rights, the start-up of the SEC Network and the high price of televising the first-ever college football national championship playoff.
But ESPN’s challenges were partly offset by gains at ABC, which has seen its ratings increase, partly on the strength of new series like the drama “How to Get Away with Murder” and the comedy “Black-ish.” Overall, ABC had seven of the top 20 rated series and three of the top five dramas – putting it in a strong position going into next week’s up-front presentations to advertisers.
Disney’s broadcast properties shined, with income up 90% to $302 million, mostly on higher fees from affiliates, increased program sales and a jump in ad revenues. Iger told analysts that, while welcoming ad growth, his company was becoming less dependent on it. Some 16% of its overall revenue comes from ads, Iger said, “so our exposure to … changes is a lot less than a lot of the other media companies.”
And the decline in the cable space was partially offset by an increase in the number of subscribers and in the rates that they paid.
Disney’s parks and resorts continued to be a force with the six percent revenue increases, quarter-to-quarter, bringing receipts to $3.8 billion and a nearly one-quarter increase leaving income at $566 million for the quarter.
Most of that jump followed the continuing economic recovery – with traffic up and park visitors spending more, including on higher admissions prices. The occupancy hikes came mostly at Walt Disney World Resort and via sales of vacation club units at Disney’s Polynesian Villas & Bungalows. The figure was depressed somewhat by lower attendance at Disneyland in Anaheim.
The 6% decline in receipts from Disney’s studio operation would have been more pronounced, but for its share of the revenues from consumer products, where “Frozen” toys and other items continued to be a hit a year after its release.
Disney as a whole continues to occupy a financial universe far, far away from most other entertainment concerns, competing mostly with its own past performance. And its prospects for the rest of the year appear potentially even brighter, as the company anticipates film releases from each of its formidable filmmaking labels — Pixar, Marvel and LucasFilm. Following the “Avengers” sequel, will come next month’s “Inside Out” from animation hit-maker Pixar and July’s “Ant Man,” which, like “Avengers,” comes from the popular Marvel comic universe.
That may only be a warmup for what most analysts expect will be the biggest box office and merchandising opportunity in recent memory — the release of “Star Wars, Episode VII” on Christmas Day. (After audiences and the market first absorb Pixar’s “The Good Dinosaur,” coming at Thanksgiving.)
Few new details were offered on the “Star Wars” marketing front by either Iger or new Chief Operating Officer Tom Staggs, who joined in an earnings call for the first time since being tabbed as heir apparent to the executive suite.
Iger said the huge interest in the most recent trailer for the film – 88 million views in the first 24 hours, alone – gives an indication of the “quite amazing” opportunities ahead – even exceeding expectations he had when he acquired LucasFilm.
Partner Electronic Arts announced the release of one “Star Wars” themed game at last month’s Star Wars Celebration in Anaheim. And more games will be forthcoming, Iger said. But most other products and new attractions at Disney parks tied to “Star Wars” will come later – merchandise in the fall and park enhancements at an undisclosed date.
Iger wants to be sure not to overwhelm the market, he said. “We also want to be careful that the demand does not create almost too much in the marketplace too soon,” he said. “And so everything we have done to date has been extremely deliberate and we have … a deliberate plan going forward.”
The question of how Disney uses its market dominance came up more than once in the call, as when Iger was asked about a report in the Wall Street Journal that theater owners were complaining the company was dictating too many terms for showings of “Avengers.”
A letter from the National Assn. of Theater Owners had suggested operators were concerned that Disney wanted to limit when cinemas could offer matinee discounts or choose to alternate “Avengers” with other movies.
While Iger declined to discuss specific terms of the company’s negotiations with cinema owners, he did apologize for taking a strong position.
“We have created and will continue to create huge value for the theater owners here in the United States and around the world,” Iger said. He said the power of films with the brand of Disney and its filmmaking partners “clearly” was a factor as the company talked to the theater owners.
The earnings were released early Tuesday, hours ahead of a previous afternoon time slot, so that company executives could complete their call with analysts early. Many of them planned to attend an afternoon memorial service for Dave Goldberg, a tech executive and the husband of Facebook COO Sheryl Sandberg, who sits on Disney’s board.