Time to break out all your jokes about The Force. Star Wars: The Force Awakens helped Disney to soar past Wall Street’s financial expectations for the last three months of 2015. We’ll have to see, though, whether that’s enough to outweigh concerns about the continuing slippage at ESPN — a much bigger force for Disney’s bottom line. Company shares were up initially in post-market trading, but then dropped 4.8%.
Disney reported net income of $2.88 billion, up 32% vs the same period at the end of 2014, on revenues of $15.24 billion, up 13.8%. That beat the consensus forecast for revenues to hit $14.billion. Earnings at $1.73 a share handily beat expectations for $1.45.
“Driven by the phenomenal success of Star Wars, we delivered the highest quarterly earnings in the
history of our Company, marking our 10th consecutive quarter of double-digit EPS growth,” CEO Bob Iger says. The results “validate our strategic focus and investments in brands and franchises to drive long-term growth across the entire Company.”
Cable Networks, including ESPN, are still the center of the action. Operating income there fell 5% to $1.19 billion on revenues of $4.52 billion, up 9%. Disney says the profit fall included a decrease at ESPN. It attributes that to “higher programming costs” — with the inclusion of the College Football Playoff bowl games and rising outlays to the NFL — “partially offset by an increase in advertising and affiliate revenues.”
But the rise in affiliate revenues was due to rate increases and was “partially offset by a decline in subscribers.”
The ABC-led Broadcasting unit saw operating income fall 7% to $223 million on revenues of $1.81 billion, up 8%. It includes higher costs for scripted programming, as well as equity losses for Hulu, which also has rising programming and marketing costs.
Studio Entertainment with Star Wars showed the biggest improvement among Disney’s operations with operating income up 86% to $1.01 billion on revenues of $2.72 billion, up 46%. In addition to the rising theatrical sales, Star Wars helped boost the unit’s income from licensed merchandise, shared with the Consumer Products and Interactive Media unit.
The merchandise operation, united for the first time with Interactive Media, showed a 23% increase in operating income to $860 million with revenues up 8% to $1.91 billion.
Parks and Resorts also fared well, with operating profits up 22% to $981 million on revenues of $4.28 billion, up 9%. The increases were driven by the domestic venues, where spending and attendance grew. Overseas the company’s operating income fell with declining attendance plus pre-opening expenses for Shanghai Disney Resort, and a four-day closure in November of Disneyland Paris following terrorist attacks in the French capitol.
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