Walt Disney : Q3 Earnings Beat But Revenue Misses, Declares To Buy Majority Stake In BAMTech

This Tuesday, Walt Disney Co., Burbank-based Company, reported third-quarter earnings that beat street’s estimates, but missed on sales & revenue, while reporting a 5 % drop in diluted earnings per share.  The posted diluted earnings per share of $1.51, down 5 % from $1.59 in the Q3 of the last fiscal year. The company announced revenues of $14.24 billion, flat from $14.28 billion the same period a year ago. Shares of Disney were down about 2.8 percent at $104.24 in after-hour trading. In the year-ago period, company reported adjusted earnings of $1.62 per share on $14.28 billion in revenue.

Disney declared as operating income for each segment, compared with street’s consensus estimates:

  • Media and networks: $1.84 billion vs. $1.99 billion expected
  • Parks and resorts: $1.17 billion vs. $1.09 billion expected
  • Studio: $639 million vs. $636.6 million expected
  • Consumer and interactive: $362 million vs. $394.6 million expected

The Walt Disney Company also said that issues at ESPN influenced operating income for its cable business. The segment witnessed 23 % YOY operating income decline. The sports network was snowed under by higher programming costs and lower advertising revenue, as well as severance and contract termination costs.

In good news, Disney will be introducing its own direct-to-consumer streaming service – the exclusive home of Disney and Pixar films from 2019. The company will no longer stream its new film releases on Netflix. The company has decided to end its distribution agreement with Netflix for streaming of new releases, beginning with its 2019 slate of films. That year’s films will include “Toy Story 4,” the sequel to “Frozen” and a live-action version of “The Lion King.” The company also announced it will buy a majority ownership in BAMTech streaming technology company (which will lead to development of an ESPN- branded sports-streaming service next year) for $1.58 billion.

Bob Iger, Chairman and CEO, Walt Disney Company, said “Today we announced a strategic shift in the way we distribute our content. The media landscape is increasingly defined by direct relationships between content creators and consumers, and our control of BAMTech’s full array of innovative technology will give us the power to forge those connections, along with the flexibility to quickly adapt toshifts in the market. This acquisition and the launch of our direct-to-consumer services mark an entirely new growth strategy for the Company, one that takes advantage of the incredible opportunity that changing technology provides us to leverage the strength of our great brands.”

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Amy Sue, CFA, is equity analyst and reports Basic Materials, Financial & REIT and Industrial Goods sectors. Prior joining Broadway Leader, Amy Sue worked with Wells Fargo. If you have a great story idea for Amy Sue, you can write at [editor@broadwayleader.com].

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