Disney cuts costs, tops profit estimates
Cable networks make money despite fears about streaming
LOS ANGELES— Walt Disney Co., which triggered a sell-off in media stocks three months ago with a warning about subscriber losses at ESPN, posted fourth-quarter earnings that beat analysts’ estimates as profit from cable networks and motion pictures rose.
Earnings rose to $1.20 (U.S.) a share, excluding items, Burbank, Calif.based Disney said late Thursday in a statement, beating the $1.14 average of 28 analysts’ estimates.
The results follow reports this week from Time Warner Inc. and 21st Century Fox Inc. that reignited investor fears that the pay-TV industry is losing ground to lower-cost streaming services such as Netflix Inc. Media stocks tumbled, as they did in August when Disney cut the long-term profit growth forecast for cable networks, such as ESPN. This time, cable networks were a bright spot for Disney.
The company has been cutting costs, most notably at ESPN, which eliminated almost 300 jobs last month. Disney introduced DisneyLife, a $15-a-month online service in the U.K. that shows archived children’s movies and shows. The company plans to expand that in Europe.
“We’re very proud of this product,” chief executive officer Bob Iger said on a conference call with analysts. “It definitely speaks to where we’re going as a company and we see opportunities to grow the concept across other markets and perhaps other brands in the future.”
Cable networks, the source of investor worry in recent months, boosted profit by 30 per cent to $1.66 billion, led by ESPN, while revenue advanced 12 per cent to $4.25 billion, Disney said. The company credited higher affiliate fees and advertising sales and said it gained subscribers with the addition of the SEC Network. Viewer ratings were down, while programming costs rose.
Sales gained 9.1 per cent to $13.5 billion in the period ended Oct. 3. That compared with estimates of $13.6 billion.
Disney’s parks and resorts division posted a 7-per-cent increase in profit to $738 million, as revenue advanced 10 per cent to $4.36 billion. Domestic parks attracted a higher number of guests and they spent more when they arrived, the company said.
Revenue from film entertainment was flat at $1.78 billion. Profit doubled to $530 million on growth from TV and streaming video, fewer writeoffs of films that didn’t do well, stronger theatrical results and a bigger share of consumer product revenue from movie related merchandise.
The results don’t include merchandise sales from Star Wars: The Force Awakens, even though such toys and gadgets went on sale Sept. 4. Accounting rules require the company to wait until the film’s December release before booking the results.