Disney expects renewed growth in 2017 following rare drop
Walt Disney Co. predicted renewed growth next year and beyond after a rare stumble in the fiscal fourth quarter.
The Burbank, Calif.-based company forecast modest earnings pershare growth in fiscal 2017 just getting under way, with chief executive officer Bob Iger promising 2018 would be even faster. Disney blamed lower quarterly sales and profit partly on its fiscal calendar, saying the just-ended period was one week shorter. Profit was also hurt by a drop in advertising at ESPN.
“We fully expect to return to more robust growth in fiscal 2018 and beyond,” Iger said on a call with inves- tors, citing an upcoming movie slate that includes Marvel movies, animated films and new Star Wars releases.
The forecast was good enough for investors looking for a kernel of good news in a quarterly report that the company and its stockholders would probably like to forget. Profit at all four of Disney’s division tumbled in the period, with the company’s cable TV unit, its biggest business, squeezed by higher programming costs, lower ad sales and fewer subscribers.
Disney shares rose 2.8 per cent to $97.65 (U.S.) in extended trading after plunging as low as $90.69 following the release of the earnings statement. The stock gained 0.3 per cent to $94.96 at the close in New York and is down 9.6 per cent this year.
Fiscal fourth-quarter earnings excluding some items fell to $1.10 a share, the world’s largest entertainment company said Thursday in a statement. Analysts were forecasting $1.16, the average of estimates compiled by Bloomberg.
Disney suffered like other broadcasters from weak ratings for NFL games, according to Robin Diedrich, an analyst with Edward Jones in St. Louis. Revenue slumped 2.7 per cent to $13.1 billion in the period ended Oct. 1, missing analysts’ estimates of $13.5 billion.
“If we continue to see ratings weakness across the cable channels, there is some long-term concern here,” Diedrich said.
Iger said at an investor conference in September that the shorter quarter cut operating income by $350 million, with most coming from cable networks. The extra week added 13 cents a share to earnings last year. Profit in the cable division tumbled 13 per cent to $1.45 billion, while revenue declined 7 per cent.
Broadcasting profit rose 37 per cent to $224 million on 8-per-cent higher revenue. Profit from parks and resorts shrank 5 per cent to $699 million. Revenue was little changed at $4.39 billion. Disney’s consumer products division posted profit of $424 million, down 5 per cent. Revenue tumbled 17 per cent.
Because Disney earns almost $8 billion a year from TV, including the ABC network, the company is viewed as especially vulnerable to the pay-TV industry’s loss of customers to newer streaming options like Netflix Inc. Last week, Nielsen Holdings Plc reported that ESPN lost 621,000 subscribers from October to November, part of a broader look at TV trends that also found other cable networks losing viewers. Iger said on the call that the Nielsen results don’t match with other researchers.
At the same time, Disney is having to pay more for programming. Credit Suisse analyst Omar Sheikh says the cost to air NBA games will rise in the current fiscal year. Chief financial officer Christine McCarthy pegged the added cost at $600 million.