Are Disney Earnings Enough for Investors?

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Walt Disney Co. (NYSE: DIS) reported its fiscal third-quarter financial results after the markets closed on Tuesday. The company had $1.45 in earnings per share (EPS) on $13.1 billion in revenue, compared to Thomson Reuters consensus estimates that call for $1.42 in EPS on $13.23 billion in revenue. The same period from the previous year had $1.28 in EPS on $12.47 billion in revenue.

Despite a strong performance across most of the segments it appears that earnings for this quarter were just not quite enough for investors.

In terms of its segments, compared to the same quarter of the previous year, Disney reported:

  • Media Networks increased its revenues by 5% to $5.77 billion, with a 4% increase in operating income to $2.4 billion.
  • Parks and Resorts increased its revenues by 4% to $4.1 billion, with a 9% increase in operating income to $922 million.
  • Studio Entertainment revenues increased by 13% to $2.0 billion, with a 15% increase in operating income to $472 million.
  • Consumer Products increased its revenues by 6% to $954 million, with a 27% increase in operating income to $348 million.
  • Interactive revenues decreased by $58 million to $208 million, operating income decreased by $29 million to break-even.

Operating results at ESPN, one of the larger components of the Media Networks segment, were driven by growth in affiliate revenue, partially offset by lower advertising revenue. The increase in affiliate revenues was due to contractual rate increases and an increase in subscribers. The increase in subscribers was due to the new SEC Network launched in August 2014, partially offset by a decline in subscribers at certain other networks.

Robert A. Iger, chairman and CEO of Disney, said:

We’re very pleased with our performance in the third quarter, with record net income and diluted earnings per share of $1.45, up 13% from the prior year. The strong results across our many diverse lines of business demonstrate the power of our unparalleled brands, franchises and creative content.

On the books, Disney reported $4.48 billion in cash and cash equivalents to end the fiscal third quarter. And Disney reported free cash flow of $4.52 billion, compared to $4.43 billion in the same quarter of last year.

Shares of Disney closed Tuesday up 0.5% at $121.69 on a 52-week trading range of $78.54 to $122.08. Following the release of earnings report, shares were initially down 2.1% at $119.17 in the after-hours trading session. The stock has a consensus analyst price target of $123.44.

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