Disney Profit Beats Expectations on Gains From Parks

Walt Disney Co., the world’s largest entertainment company, said fiscal fourth-quarter profit rose 12 percent, beating analysts’ estimates as the company’s theme parks and consumer products boosted income.

Net income grew to $1.39 billion, or 77 cents a share, from $1.24 billion, or 68 cents, a year earlier, Disney said yesterday in a statement, topping the 76-cent average of 27 analysts’ estimates compiled by Bloomberg. Revenue increased 7.3 percent to $11.6 billion in the period ended Sept. 28, beating the $11.4 billion average of estimates.

Investments in new attractions spurred higher guest spending and occupancy at Disney’s U.S. resorts, letting the company increase ticket prices. Disney, based in Burbank, California, is working on “Star Wars” rides in Orlando, Florida, and California, Chairman and Chief Executive Officer Robert Iger told Bloomberg Television.

“There is a fair amount of development going on at Disney Imagineering right now to expand the ‘Star Wars’ presence in California and in Orlando, and eventually in other parks around the world,” Iger said.

Profit at Disney’s parks and resorts division increased 15 percent to $571 million in the quarter, as revenue grew 8.5 percent, the company said.

At the consumer products unit, income surged to $347 million, with sales growing 14 percent.

Popular films such as “Planes” and “Monsters University” boosted merchandise sales, while helping the Disney studio weather a loss on “The Lone Ranger,” the Johnny Depp movie that flopped in theaters. The first “Star Wars” film under Disney’s ownership of Lucasfilm is scheduled for release on Dec. 18, 2015, the company said.

Disney Junior

The consumer unit’s results were also driven by sales tied to the Disney Junior cable network for preschoolers.

Income at Disney’s film division rose to $108 million from $80 million, boosted by television and subscription video on demand services, such as Netflix Inc.

Disney has found success at the box office with its Marvel comic-book characters, acquired in 2009, and is pushing them into new areas. Marvel’s “Iron Man 3” is the top-performing film of 2013 with $1.22 billion in worldwide box-office sales. “Thor: The Dark World,” also from Marvel, opens today.

Disney said yesterday it will produce four Marvel superhero TV series for Netflix. The company will also make more original content for other outlets. Iger cited the potential of Twitter Inc., which went public yesterday.

Shorter Shows

“It’s yet another means of distribution,” Iger said. “We’re also seeing that migration in media, you know yesterday’s short is today’s long. I think we have to be mindful of that, too.”

Disney gained 2.1 percent to $69.58 at at the close in New York. The stock has gained 38 percent this year, compared with 20 percent for the Dow Jones Industrial Average.

Lower income at cable networks including ESPN, the company’s biggest source of profit, initially caused Disney to drop in extended trading yesterday after the results.

Higher programming costs for football and baseball weighed on a division that typically produces 40 percent of Disney’s earnings, according to Martin Pyykkonen, an analyst at Wedge Partners Corp. In addition to those costs, Disney recognized $172 million less in deferred affiliate revenue after recording the payments earlier in the year.

ESPN Competition

Profit from cable, largely ESPN and the Disney Channels, slid 7 percent, the company said. ESPN also faces competition from Rupert Murdoch’s new Fox Sports 1.

“We remain confident in ESPN’s value and continued reign as the leader in sports,” Iger said on a conference call.

Investments in the Disney Channel in Germany also crimped cable profit, Chief Financial Officer Jay Rasulo said on the call. In addition, Disney recorded less income from its investment in A&E Television Networks and sold ESPN U.K.

Disney Interactive, which began selling the new Disney Infinity video-game products, posted a profit of $16 million in the quarter, reversing a year earlier loss. Revenue more than doubled to $396 million.

Profit at the ABC broadcast division fell 18 percent to $158 million, with revenue growing 2 percent to $1.37 billion. Disney isn’t selling its local TV stations, Iger said.

“As long as we’re in the network business, we’ll be in the station business,” Iger said on the call.

Before it's here, it's on the Bloomberg Terminal.