Shares closed at a record $66.07, but are fluctuating up and down after hours following the release of a generally upbeat report for the first three months of 2013. Disney reported net income attributable to shareholders of $1.51B, +32% vs the period last year, on revenues of $10.55B, +10%. The top line beat expectations for $10.48B. And not including one-time costs, earnings of 79 cents a share exceeded forecasts for 76 cents. At the core cable networks business, revenues were up 9% to $3.46B with operating income of $1.72B, +15%. ESPN helped with higher affiliate fees and advertising outweighing the rising programming costs. The ABC broadcasting unit wasn’t as fortunate: Revenues fell 2% to $1.50B and operating income was down 40% to $138M as programming costs rose and ad sales fell, mostly due to the network’s lower ratings. At Parks and Resorts revenues were +14% to $3.3B, with operating income +73% to $383M. Higher ticket prices didn’t deter consumers from increasing their spending at Disney’s parks and cruise ships. The film studio had no trouble beating last year’s quarter which included the writedown for John Carter: Revenues were up 13% to $1.34B with operating income of $118M vs an $84M loss last year. Consumer products revenues rose 12% to $763M with operating income +35% to $200M helped by sales of licensed merchandise tied to Disney Channel, Mickey and Minnie, and Marvel properties. And at the interactive business, revenues were +8% to $194M with an operating loss of $54M — an improvement from last year’s $70M loss — with gains in the Japan mobile business. “Our results reflect our successful strategy, the strength of our brands and the value of our high-quality creative content, all of which continue to drive long-term growth and shareholder value,” CEO Bob Iger says.
Disney shares fell nearly 6% today, to $47.06, as investors responded to the company’s warning that it likely will report uninspiring earnings for the last three months of 2012. CFO Jay Rasulo says the company will be hit by “few timing and comparability issues” in the quarter — although when it comes to the entire year ”overall, we feel great.” Some analysts remain wary. Janney Capital Markets’ Tony Wible downgraded the company to “neutral” noting that the stock is already expensive — it appreciated 40% over the last 12 months. What’s more, the issues that Rasulo cited coincide with a relatively weak ad market and stock dilution from Disney’s acquisition of Lucasfilm. “We see greater potential for modeling errors over the coming quarters,” Wible says. Barclays Equity Research’s Anthony DiClemente also wonders whether a few of the company’s issues “may be ‘trending’” problems, not just timing ones. But RBC Capital Markets’ David Bank is more optimistic saying that while the next quarter may look dreary “we don’t think the trends will persist much beyond that period.”
The basic numbers look pretty good — Disney says earnings hit a record high –with Parks and Resorts the star operation in the quarter that ended in June. The company reported net income of $2.0B, +22.4% vs the period …
UPDATE, 3:35 PM: CEO Bob Iger seemed more relaxed and feistier than usual in today’s earnings call with analysts. He called the ad market “healthy” — with all spots sold out for the upcoming Academy Awards broadcast. He wouldn’t comment on reports about ABC’s talks to create a news channel with Univision, although he says that Disney has “an interest in seeing that ABC News has an opportunity to flourish.” But he also acknowledged that he’s scratching his head over some recent industry initiatives. Iger says that he’s ”still not sure I understand” what Verizon and Redbox have planned for their just-announced streaming service. He added that Disney is ”in discussions” to change its DVD and Blu-ray release policy to wait 28 days before selling discs directly to discount rental services such as Redbox and Netflix. Up to now Disney didn’t think that a delay would have much impact on disc sales, but he says that “the industry has continued to suffer on the sell-through side.” Yet Iger sounded frustrated by another initiative to promote disc sales: giving disc buyers the additional opportunity to stream movies to mobile devices. Disney has its own program, called Key Chest. Iger says, though, that ”we haven’t rolled out Key Chest as much as we hoped.” Meanwhile he’s “taking and wait-and-see” on joining other studios that support the UltraViolet streaming program. Iger says he’s “not sure it has proven to be as robust as we expected, or as consumer friendly as we had hoped.”