Disney continues to surprise Wall Street

by Leah Zanolla
Jul 31, 2008

Disney announced a 9% increase in profits for their third fiscal quarter on Wednesday. This percentage reflects a net income of $1.3 billion which resulted in shares increasing 66 cents. The share number is 6 cents higher than what Wall Street predicted, even when the 4 cent share increase following the Movies.com sale and repurchasing Disney Store North America are excluded.

The strong financial showing is credited to Disney's ESPN network, the increase of viewership of the Disney Channel overseas and a surprising 5% upswing in revenue from Disneyland Paris. These factors combined for a 2% increase in revenue to $9.2 billion.

Analysts have been predicting a downturn in park attendance resulting from a cutback in flights to Orlando. In response, Disney Chief Executive Bob Iger stated "About half of the visitors to the park fly, but they tend to book early and account for only about 30% of the seats."

Anthony J. DiClemente of Lehman Bros. Equity Research commented "The outlook (for the parks) is holding steady. Investors are focused on whether the next leg of information is going to be a re-acceleration or a deceleration in the year-over-year growth."

Disney's parks and resorts saw income rise by 3% to $641 million on revenue of $3 billion making it the second highest income generator after the company's cable/network stations.

According to Thomas Staggs, Disney's Chief Financial Officer, park attendance did see a slight dip due to Easter falling early this year. However, the company saw a gain due to an upswing in guest spending and from income derived from sponsors such as Hewlett-Packard and Microsoft.

Disneyland did see a 2% drop in attendance and hotel occupancy fell 5% to 91%. The latter was offset by increased room rates which resulted in a 5% increase in hotel income.

Staggs stated that Disney's hotel reservations at their Florida and California resorts are "virtually on par" with last year's and are "modestly ahead" for the upcoming December quarter.

Disney's cable stations posted a 12% increase to $2.6 billion in revenue. ESPN continues to be a strong income source and Disney Channel has seen an increase in subscriptions thanks to such mega-hits as "Camp Rock" which came close to setting a ratings record.

While these numbers have buoyed Disney's value, overall broadcasting revenue was flat at $1.5 billion in comparison to last year's quarter. Operating income was down by 11% to $260 million due to a softening in ad revenue, specifically in the auto, consumer electronics and financial services industries.

Where Disney is seeing trouble is in the movie studio. Due to disappointing results in "Prince Caspian", the company saw a 19% drop compared to last year's numbers when "Pirates of the Caribbean: At World's End" was released. Even with Pixar's "Wall-E" posting strong showing at the box office, operating income was down by 49% to $97 million.

Disney shares were down by 77 cents to $30.90 in late trading on Wednesday after the earnings were announced. The stock did rise 75 cents to close at $31.67.

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• Last Updated: Feb 8, 2012 - 9:40:38 AM