Is the Mouse House in Trouble After This Quarter?

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The Walt Disney Co. (NYSE: DIS) released fiscal third-quarter financial results after markets closed Tuesday. The Mouse House said that it had $1.35 in earnings per share (EPS) and $20.25 billion in revenue, compared with consensus estimates that called for $1.75 in EPS and $21.47 billion in revenue. The same period from last year had $1.87 in EPS and $15.23 billion in revenue.

Media Networks revenues for the quarter increased 21% to $6.7 billion and segment operating income increased 7% to $2.1 billion. This was comprised of Cable Networks and Broadcasting which had revenues of $4.46 billion and $2.25 billion, respectively.

Parks, Experiences and Products revenues for the quarter increased 7% to $6.6 billion and segment operating income increased 4% to $1.7 billion. Operating income growth for the quarter was due to increases at consumer products businesses and Disneyland Paris, partially offset by a decrease at domestic parks and resorts.

Studio Entertainment revenues for the quarter increased 33% to $3.8 billion and segment operating income increased 13% to $792 million. Higher operating income was due to an increase in theatrical distribution results and lower film cost impairments at legacy operations.

Direct-to-Consumer & International revenues for the quarter increased from $827 million to $3.858 billion and segment operating loss increased from $168 million to $553 million. The increase in operating loss was due to the consolidation of Hulu, the ramp-up of investment in ESPN+, which was launched in April 2018 and costs associated with the upcoming launch of Disney+.

Bob Iger, chairman and CEO, commented:

Our third-quarter results reflect our efforts to effectively integrate the 21st Century Fox assets to enhance and advance our strategic transformation. I’d like to congratulate The Walt Disney Studios for reaching $8 billion at the global box office so far this year–a new industry record–thanks to the stellar performance of our Marvel, Pixar and Disney films. The incredible popularity of Disney’s brands and franchises positions us well as we launch Disney+, and the addition of original and library content from Fox will only further strengthen our direct-to-consumer offerings.

Shares of Disney closed Tuesday at $141.95, with a 52-week range of $100.35 to $147.15. The consensus analyst price target is $151.65. Following the announcement, the stock was down 4% at $136.06 in the after-hours session.

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