Disney Beats Earnings Expectations for 11th Straight Quarter

Disney continued its long winning streak with its latest quarterly report Tuesday, with earnings of $1.45 a share beating analysts’ expectations for the 11th quarter running. Revenue pushed upward to $13.10 billion, beating the year-ago figure of $12.47 billion by a neat 5%.

The entertainment conglomerate’s three-year winning streak appeared to be in no danger of ending, either, with the release of the latest installment in the “Star Wars” film epic set for Christmas. Box office and merchandising bonanzas are predicted for the J.J. Abrams-helmed “Star Wars: The Force Awakens.”

The company’s big three franchise subsidiaries –Pixar, Lucasfilm and Marvel — continued to feed winning films into the Disney column. Marvel’s “Avengers: Age of Ultron” has pulled in nearly $1.4 billion in worldwide box office, while Pixar’s  “Inside Out” bagged more than $600 million during the third quarter. Revenue’s for Disney’s studio entertainment increased for the quarter by 13% to $2.0 billion and segment operating income increased 15% to $472 million.

Riding the three-year winning streak, Walt Disney Company CEO Robert Iger again expressed his pleasure with the results, saying, “The strong results across our many diverse lines of business demonstrate the power of our unparalleled brands, franchises and creative content.”

The studio’s strong performance was attributed both to the big attendance at films like “Age of Ultron” and “Inside Out” but also to the continuing popularity of “Cinderella.”

Not that there weren’t a few clouds on Disney’s sky-blue report. The company suffered the disappointing opening of “Tomorrowland,” the sci-fi George Clooney picture that brought in just over $92 million domestically on a budget estimated at $190 million.

Though there have been some concerns about the spiraling cost it pays for programming, ESPN still notched a 7% gain in operating income, rising from $1.94 billion in the prior quarter to more than $2 billion in the quarter ending in late June. The company attributed some of the gain to the increased subscriber base that came with the addition of its new SEC Network — covering the powerhouse colleges in the southeastern U.S.

The company suffered some falloff in T.V. ad revenue and a drop in rates compared to the prior quarter, in 2014, the earlier figures gaining a big boost from the broadcast of the men’s World Cup soccer tournament. Operating income for the Broadcast division dropped 15% to $300 million, in part because of the increased cost of buying rights and producing sports events.

Iger acknowledged that the cost of acquiring new programming — like the right to broadcast NBA games in 2017 –comes with a large cost. But he said it also provided a chance for the company to sell more advertising on television and to expand the reach of its offerings online. “While there is definitely an increase in costs,” Iger said, “there is huge increase in terms of opportunity as well, to reach more people, to serve advertisers more effectively and to grow our digital platforms.”

The company’s Interactive unit logged the only negative revenue performance compared to a year ago. Revenues for the operation declined from $266 million to $208 million. The company attributed the decline to a drop off in sales of its Infinity video game. The Interactive unit was combined earlier this year with the company’s enormously successful Consumer Products unit.

Another reporting milestone came Tuesday in the person of Christine McCarthy, the company’s first female chief financial officer, who was scheduled to report Disney’s financial results along with Iger. Iger welcomed McCarthy as a professional of tremendous acumen and the new CFO, in turn, said how honored she was to take the position. She is the highest ranking woman in the history of the entertainment company.

While analysts and others have been pumping up expectations for “Star Wars Episode VII,” as the Dec. 18 film is also known, Iger sought to both harness the expectations and rein them in slightly. “We know we have probably the most valuable film franchise that every existed,” Iger said, noting the film will have spinoff benefits for Disney’s theme parks, its games and its T.V. programming. He said the benefits would extend to 2016, and beyond.

Yet, he said the size of the take for Disney remains unclear, because the franchise is is less well known in some international markets and it remains unclear how enthusiastically they will respond.

Chief Operating Officer Tom Staggs offered a balanced view of the company’s big upcoming theme park addition. While Shanghai Disney is expected to be a big contributor to the bottom line in the long run, said Disney’s No. 2, it initially brings huge costs to the Disney books. Roughly half of the pre-opening expenses for the Shanghai park will be logged next year and the park is not expected to be profitable until after 2016, Staggs said.

 

Disney stock has been on a tear, rising almost 30% since the start of the year to a new high of $121.69  during regular trading on Tuesday. Even after the mostly-positive results, Disney trended downward in after-hours trading, declining to about $114 per share.

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