Disney Stumbles Amidst Weak Earnings

The Walt Disney Co. (NYSE: DIS) reported fiscal second-quarter financial results after the markets closed on Tuesday. The company had $1.36 in earnings per share (EPS) on $12.97 billion in revenue compared to consensus estimates from Thomson Reuters that called for $1.40 in EPS on $13.19 billion in revenue. The same period from last year had $1.23 in EPS on $12.46 billion in revenue.

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Since last summer there has been a concern at Disney surrounding what the company needs to do with its ESPN segment. The question is whether to sell it, spin it off, or keep it. ESPN’s performance this quarter helped drive operating income in the Cable Networks sub-segment.

In terms of the segment results Disney reported:

• Media Networks revenues for the quarter were relatively flat at $5.8 billion and segment operating income increased 9% to $2.3 billion.
• Parks and Resorts revenues for the quarter increased 4% to $3.9 billion and segment operating income increased 10% to $624 million. Operating income growth for the quarter was due to an increase at domestic operations, partially offset by a decrease at international operations.
• Studio Entertainment revenues for the quarter increased 22% to $2.1 billion and segment operating income increased 27% to $542 million. Higher operating income was due to an increase in theatrical distribution results and growth in TV/SVOD distribution, partially offset by the impact of foreign currency.
• Consumer Products & Interactive Media revenues for the quarter decreased 2% to $1.2 billion and segment operating income decreased 8% to $357 million. Lower operating income was primarily due to the impact of foreign currency translation, lower operating margins and comparable store sales.

Robert A. Iger, Chairman and CEO of Disney, commented:

We’re very pleased with our overall results in Q2, which marks our 11th consecutive quarter of double-digit growth in adjusted EPS. Our Studio’s unprecedented winning streak at the box office underscores the incredible appeal of our branded content, which we continue to leverage across the entire company to drive significant value. Looking forward, we are thrilled with the Studio’s slate and tremendously excited about the June 16th grand opening of the spectacular Shanghai Disney Resort.

Free cash flow for the fiscal second quarter totaled $3.21 billion at the end of the quarter compared to $2.87 billion. On the books, cash and cash equivalents totaled $5.02 billion at the end of the quarter versus $4.27 at the end of the previous fiscal year.

Shares of the Mouse House closed Tuesday up 1.2% at $106.60, with a consensus analyst price target of $109.50 and a 52-week trading range of $86.25 to $122.08. Following the release of the earnings report, the stock was down 5.7% at $100.52 in the after-hours trading session.