Walt Disney Co., the world’s largest media company, said fiscal second-quarter profit climbed 55 percent on a rebound at the film studio. The shares fell after the television units’ profit missed some analysts’ estimates.
Programming costs rose at ESPN, which had a “mid-single- digits” percentage increase in advertising sales, Burbank, California-based Disney said today. The ABC broadcast network was hampered by lower prime-time ratings and higher expenses.
“The cable network margins were a little bit light of what people were expecting,” said Doug Creutz, an analyst at Cowen & Co. in San Francisco. “Disney had talked about how they were going to have sports programming-rights expenses, but I think the magnitude of that caught some people by surprise.”
Disney fell $1.20, or 3.4 percent, to $34.56 in extended trading after the results were announced. The shares gained 47 cents to $35.76 at 4 p.m. in New York Stock Exchange composite trading and have increased 11 percent this year.
Net income rose to $953 million, or 48 cents a share, from $613 million, or 33 cents, a year earlier, Disney said in a statement. That beat the 46-cent average of 22 analysts’ estimates compiled by Bloomberg. Sales in the period ended April 3 gained 6.1 percent to $8.58 billion after the January takeover of Marvel Entertainment. Analysts expected $8.42 billion.
Hotel reservations at the theme parks are pacing down 10 percent in the current quarter, Chief Financial Officer Jay Rasulo said on a conference call after the results. The company is using fewer discounts to lure visitors to parks near Orlando, Florida, and in Anaheim, California.
“To the extent that they had a beat in the quarter it was driven by film. I think people would rather have seen it driven by cable and parks,” Creutz, who rates the shares “neutral,” said in an interview.
Profit in the cable division led by ESPN totaled $1.18 billion, short of the $1.21 billion estimate of Imran Khan, an analyst at JPMorgan Chase & Co. who has a neutral rating on the stock. Revenue in the division, including the Disney Channel, gained 9.4 percent to $2.41 billion, led by increases in affiliate fees, the company said.
ESPN’s ad revenue was up by a “mid-single-digits” percentage in the quarter, Rasulo said.
Discovery Communications Inc., the owner of Animal Planet, reported a 9 percent gain in U.S. cable ad revenue last week. Time Warner Inc., the owner of CNN and TBS, said cable ad sales gained 9 percent.
“Sometimes some of the numbers we see out there are not apples-to-apples across different companies,” Rasulo said. He said Disney reports ad revenue that includes cash sales and make-goods.
Profit in Disney’s broadcast division, including ABC, fell 24 percent to $123 million, while revenue gained 1.1 percent to $1.43 billion. Khan had expected profit of $170.1 million.
In the current quarter, prices for commercials on ABC sold close to air date are up 30 percent from spots sold last year in advance of the current TV season, Disney said. Ad sales at ESPN and the TV stations are pacing up by “double digits” compared with a year ago, Rasulo said.
ESPN Ad Sales
Worldwide ticket sales of $960.4 million for the 3-D “Alice in Wonderland” revived Disney’s film profit. Chief Executive Officer Robert Iger named Rich Ross, former head of the Disney Channel, to lead the studio in October and completed the $4.2 billion purchase of Marvel, maker of “Iron Man 2,” in January.
Led by “Alice,” which was shown in three-dimensional and standard format, the studio reported a profit of $223 million, compared with $13 million a year earlier. Revenue increased 7 percent to $1.54 billion from $1.44 billion a year earlier, when Disney’s films included “Race to Witch Mountain” and “Confessions of a Shopaholic.”
“Iron Man 2,” distributed by Viacom Inc.’s Paramount, has collected $323.4 million in global ticket sales as of May 9, according to Box Office Mojo, a unit of Seattle-based Amazon.com Inc. “Toy Story 3,” from Disney’s Pixar studio, will be in theaters on June 18.
Profit from theme parks fell 12 percent to $150 million, while revenue gained 1.7 percent to $2.45 billion as higher guest spending countered a drop in attendance. Pension and retiree medical costs rose.