After Wednesday’s close, entertainment icon Walt Disney Co (NYSE:DIS) posted its fiscal Q2 results. Investors weren’t expecting much, knowing the company’s TV business has been under fire while its theme parks and resorts are has been mostly stagnant. Unfortunately for DIS stock, the company failed to trounce those tepid expectations.
For the quarter ending in March, the House of Mouse reported earnings of $1.50 per share and sales of $13.33 billion. The bottom line was better than expected; analysts had been calling for a profit of $1.45 per share of DIS stock. But, revenue fell well short of the expected $13.48 billion. The company earned $1.36 per share on a top line of $12.97 billion in the comparable quarter from a year earlier.
Perhaps more important, last quarter’s results snapped a two-quarter streak of declining revenue and a couple quarters of shrinking income. The market couldn’t get past the revenue shortfall though, sending Disney stock down just a bit in after-hours trading.
CEO Bob Iger commented on the quarter’s results:
“Disney delivered another quarter of double-digit EPS growth, driven by the strong performance of our studio and parks and resorts. 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.”
DIS stock owners don’t see quite as much strength as Iger did in its second-quarter numbers.
Disney Earnings in Focus
Walt Disney is a multi-faceted company, but there has been one franchise in the spotlight of late … its sports-television property, ESPN.
It was and still is the name in sports television channels, commanding an amazing premium from cable companies relative to their other channels. With more options available than ever before though, and with the impressive growth of non-sports entertainment, Disney has struggled to maintain its much-needed pricing power. Last month, ESPN laid off another 100 employees in an effort to cull costs.
It wasn’t the first time the DIS division has been forced to retreat either. It may also not be the last time, judging from last quarter’s numbers. Although revenue driven by its Media Networks arm was up 3% to $5.94 billion, its operating income fell 3% to 2.22 billion. Disney doesn’t break out specific numbers for the division, but it did note that ESPN was once again a sore spot.
Still, its other divisions fared well enough. Beauty and the Beast (the live action remake of the animated version released in 1991) caught the last couple of weeks of the fiscal quarter, and managed to muster roughly $700 million worth of ticket sales that were added to Q2’s top line. All told, its movie-making arm generated $2.01 billion worth of revenue in Q2, and converted $656 million of that into operating income. Its profits were up even though its sales were a bit lower on a year-over-year basis.
It’s worth noting, however, that the second fiscal quarter’s studio revenue was facing some unfairly tough competition. A year earlier, ticket sales of Star Wars: The Force Awakens were still going strong in the comparable quarter, and Zootopia was released very early in the year-ago quarter and had several weeks to garner box office revenue.
As for theme parks and resorts — the company’s decided shining star — revenue was up 9% to $4.3 billion, and operating income grew 20% to $750 million. The opening of the Shanghai Disney Resort in the third quarter of last year made a big contribution to that growth.
Looking Ahead for DIS Stock
Walt Disney did not offer any guidance with its second-quarter report, but for the quarter currently underway, analysts had projected income of $1.70 per share on sales of $14.74 billion. Both are modestly higher than year-ago figures. For the full year, those same pros project a bottom line of $5.95 per share of DIS stock on sales of $56.87 billion. Both sets of projections are modestly better than their year-ago comparisons.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
