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Disney Tops Earnings Estimates, but Revenues Fall Short

The Walt Disney Company has topped Wall Street earnings estimates for its fiscal second quarter that ended on March 31, thanks to strong performances by feature films and theme parks.

The company, however, fell short on revenues with $13.34 billion, which were up 3% over the year-ago quarter, while analysts had expected $13.45 billion. Disney reported the earnings after the market closed on Tuesday.

Disney shares took a hit in afterhours trading in the wake of the revenues not meeting expectations. Shares were down more than 2%, falling $2.68 to $109.39 a share as of 6:40 p.m. EDT.

Earnings for the quarter were up 15% to $2.39 billion, or $1.50 a share. Analysts had been expecting $1.41 a share.

“Disney delivered another quarter of double-digit EPS growth, driven by the strong performance of our studio, and parks and resorts,” said Chairman and CEO Bob Iger. “Our continued strong performance is a direct result of our proven strategic focus on great branded content, innovative technology and global growth.”

“We’re pleased with our results in Q2 and remain confident in our ability to continue to deliver significant shareholder value over the long term,” he added.

Disney’s movie studio benefited from two films — “Rogue One: A Star Wars Story” and “Beauty and the Beast.” Both pics have grossed more than $1 billion worldwide, although a majority of “Rogue One” box office came in the previous quarter. The studio entertainment segment saw revenues edge down 1% to $2.03 billion while operating income soared 21% to $656 million for the quarter.

“Theatrical distribution results were comparable to the prior-year quarter,” Disney said. “The current quarter
benefited from lower pre-release marketing costs and the strong performance of ‘Beauty and the Beast.’ However, these benefits were offset by the performance of ‘Star Wars: The Force Awakens’ and ‘Zootopia’ in the prior-year
quarter compared to ‘Rogue One: A Star Wars Story’ and ‘Moana’ in the current quarter. ‘Zootopia’ was released in the second quarter of the prior year, whereas ‘Moana’ was released in the first quarter of the current year.”
Weak ratings and higher programming costs at ESPN and ABC were a drag on earnings. ESPN’s distribution revenue was also hit by subscriber losses. Disney said that its cable results were also held down by higher programming costs from a new NBA deal and three additional college football playoffs in the quarter.
Revenues in the overall media networks segment rose 3% to $5.9 billion while operating income slid 3% to $2.2 billion. Operating income for the broadcast networks segment rose 14% to $344 million with revenues up 3% to $1.88 billion, thanks to sales of “Iron Fist” and “How To Get Away With Murder.”
Theme park operating income gained 20% to $750 million with revenues up 9% to nearly $4.30 billion. Disney says gains were due to the Shanghai Disney Resort, which opened last year helped, along with increases at the U.S. theme parks.
The consumer products and interactive media sector generated a 3% increase in operating income to $367 million while revenues fell 11% to $1.06 billion. The games business improved due to the discontinuation of Infinity console games in the year-ago quarter. Retail business operating income declined because of strong sales in the prior-year quarter for “Frozen” and “Star Wars”  merchandise.

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