Disney Reports 40% Jump In 3Q Profit On Hit Movies

I meant to post this when it was published last month. Sorry. 🙂

Walt Disney Co.’s (DIS) fiscal third-quarter earnings jumped 40% because of deferred revenue at ESPN and hit movies like “Toy Story 3,” although its domestic theme parks continued to struggle.

Nonetheless, shares of media giant climbed 1.1% after-hours to $35.68 as the company’s results beat analysts’ views. Disney’s stock had risen 9.4% this year, better than the broader market.

In the most recent period, the film and TV production studio swung to a profit as revenue jumped 30% on the strong response to “Toy Story 3,” as well as “Alice in Wonderland” and “Iron Man 2.” The results were a bit stronger than expected, said Alan Gould, analyst with Evercore Partners.

Disney’s networks division, the company’s largest, posted a 19% rise in revenue and a 43% jump in profit, driven by deferred revenue at ESPN and, to a lesser extent, the Disney Channel. Broadcasting, which includes ABC, posted modest 4% and 2% increases in revenue and earnings, respectively.

Media companies have been reporting improvement in the advertising spending after the recession caused a slump in ad dollars. On the company’s conference call, Disney Chief Financial Officer Jay Rasulo said advertising is strong, but visibility is “somewhat limited”

Disney’s theme parks struggled in the most recent period, hurt by decreases at its domestic parks and Disney Cruise Line. Overall, revenue rose 3% thanks to higher guest spending, but operating income fell 8% because of increased costs and lower attendance and hotel occupancy.

Disney said unfavorable timing of the Easter holiday hurt attendance. However, results at the international parks improved, not only because of a real estate sale but also on better guest spending, hotel occupancy and attendance at Disneyland Paris.

Gould noted that the company, in a display of confidence, recently raised prices at its parks division. The company used discounts to boost attendance during the recession, but executives have said Disney has been reining them in since the beginning of the year, aiming for prices to return to normal next year.

In the current fourth quarter, Disney’s hotel bookings are down 9% from a year ago.

For the third quarter ended July 3, the company posted a profit of $1.33 billion, or 67 cents a share, from $954 million, or 51 cents a share, a year earlier. Both periods included restructuring and impairment charges, while the most recent period also included a gain on the sale of the Power Rangers franchise, which canceled out the charges in the most recent results.

Analysts surveyed by Thomson Reuters predicted earnings of 58 cents a share Gould noted that Disney’s EPS results were boosted by about 7.5 cents a share from roughly $230 million more in deferred revenue at ESPN than analysts were expecting. He said that should be factored out when comparing the company’s results to Wall Street estimates.

Revenue increased 16% to $10 billion, above the average analyst estimate of $9.38 billion.