Disney beats forecasts with a 9% profit gain

Walt Disney Co. continues to defy economic gravity. The Burbank entertainment company on Wednesday reported net income of nearly $1.3 billion, or 66 cents a share, for the fiscal third quarter ended June 28, up 9% from a year earlier.

Disney beat analysts’ consensus estimates of 60 cents a share, according to Bloomberg, even when excluding an accounting gain related to the acquisition of Disney Stores in North America and the sale of Movies.com, which added 4 cents a share.

Revenue inched up 2% to $9.2 billion by the strong performance of ESPN and the expansion of the Disney Channel in overseas markets. Parks and resorts also saw a surprising 5% revenue bump, driven by increases at Disneyland Resort Paris, where the company benefited from a favorable currency rate. Investors have been nervous about the effect of the deteriorating economy on Disney’s theme parks.

Disney Chief Executive Bob Iger told Wall Street analysts during a Wednesday earnings call that flight availability simply “has not been a factor.” About half of the visitors to the park fly, he said, but they tend to book early, and account for only about 30% of the seats.

Disney’s cable networks delivered double-digit gains in operating income, up 14% to $1.2 billion, thanks primarily to ESPN. Cable network revenue jumped 12% to $2.6 billion. The Disney Channel, whose “Camp Rock” movie generated what Iger described as “near record” cable ratings and online traffic, also gained subscribers. But the broadcasting group’s operating income fell 11% for the quarter to $260 million, dragged down by lower ad sales at the local television stations. Broadcasting revenue was flat at $1.5 billion compared with the same quarter a year earlier.

Although the Disney/Pixar Animation film “Wall-E” performed well and received wide critical acclaim, it did not compensate for the underperformance of “The Chronicles of Narnia: Prince Caspian.” Studio Entertainment division revenue was $1.4 billion, a 19% drop from a year earlier, when Disney released “Pirates of the Caribbean: At World’s End.” Operating income plunged 49% to $97 million.

The consumer-products unit reported a 20% jump in quarterly revenue to $642 million, driven primarily by the acquisition of Disney Stores in North America and licensing revenue collected on “Hannah Montana” and “High School Musical” merchandise.

However, its operating income fell 4% to $113 million from a year earlier, because of sluggish sales of video games and ongoing investment in development.

Shares of Disney fell 77 cents to $30.90 in late trading Wednesday after the earnings announcement. The stock had risen 75 cents to close at $31.67.

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Published by Reinout te Brake

Reinout is a games investor and strategic business consultant specializing in the games industry. Reinout established his credentials through his own successful investments, start-ups, consulting and (advisory) board positions that led through time to strong bonds with key stakeholders in this fast paced industry. He is known for his outstanding results in the gaming industry. He has worked with many game studios around the globe and is therefore well known in the international gaming industry. Check out his games podcast; https://www.game-consultant.com

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