Walt Disney Co. 4th Quarter Earnings Show Solid Results, Higher Revenue Across All Segments

This afternoon, The Walt Disney Company released their earnings report for the 4th fiscal quarter of 2019 (ending September 30, 2019) and 2019 fiscal year, showing revenue up 34% and income up 5% over last year for the quarter, and revenue up 17% and income down 5% for the year.

Bob Iger said in a written statement,

“Our solid results in the fourth quarter reflect the ongoing strength of our brands and businesses. We’ve spent the last few years completely transforming The Walt Disney Company to focus the resources and immense creativity across the entire company on delivering an extraordinary direct-to-consumer experience, and we’re excited for the launch of Disney+ on November 12.”

This earnings report is the fourth under a strategic reorganization plan that took place last year. Previous divisions Parks and Resorts is now Parks, Experiences and Consumer Products. The remaining portion of the Consumer Products & Interactive Media division is now Direct-to-Consumer and International. Media Networks and Studio Entertainment remain.

This also reflects the third report since the acquisition of 21st Century Fox assets.

Overall Earnings

Diluted earnings per share were down 72% from last year’s 4th quarter, from $1.55 to $0.43 and also down 25% for the fiscal year, from $8.36 to $6.27. Revenues for the company were up compared to last last year, from $14.306 billion to $19.100 billion for the quarter; revenue for the fiscal year went from $59.434 billion to $69.570 billion. Operating income increased slightly from $3.277 billion to $3.436 billion for the 4th quarter, and down slightly for the fiscal year from $15.689 billion to $14.868 billion.

Christine McCarthy, Chief Financial Officer, commented, “we’re pleased with our results this quarter and how we closed out the fiscal year.”

• Parks, Experiences, and Consumer Products: 8% growth in revenues and 17% growth in operating income for the 4th quarter; 6% growth in revenues and 11% growth in operating income for the fiscal year
  
• Direct-to-Consumer and International: 316% growth in revenues and 118% decrease in operating income for the 4th quarter; 174% growth in revenues and 146% decrease in operating income for the fiscal year
• Media Networks: 22% growth in revenues and 3% decrease in operating income for the 4th quarter; 13% growth in revenues and 2% increase in operating income for the fiscal year
• Studio Entertainment: 52% growth in revenues and 79% increase in operating income for the 4th quarter; 11% growth in revenues and 11% decrease in operating income for the fiscal year
• 21st Century Fox: This is the second quarter numbers have been reported, so there is no comparison to last year

Parks, Experiences, and Consumer Products

Compared to last year’s 4Q, Parks, Experiences, and Consumer Products saw growth of 8% in revenues, from $6.135 billion to $6.655 billion; for the fiscal year, revenue was up 6% from $24.701 billion to $26.225 billion. For the quarter there was a 17% growth in segment operating income, from $1.177 billion to $1.381 billion; the fiscal year saw an 11% increase, from $6.095 billion to $6.758 billion.

Growth was due increases from merchandise licensing, plus gains at the Disneyland Resort and Disney Vacation Club.

Disneyland saw lower attendance, but increased guest spending.

DVC saw higher sales for Disney’s Riviera Resort in the quarter.

Quarterly results for Walt Disney World was comparable the previous year, despite the affect of Hurricane Dorian.

Results at international parks were also comparable to the previous year.

Direct-to-Consumer and International

The Direct-to-Consumer and International division saw revenue growth of 316% for this quarter over last year, from $825 million to $3.428 billion; for the fiscal year, revenue was up 174% at $9.349 billion from $3.414 billion. Operating income loss increased 118%, from a loss of $340 million to a loss of $740 million; for the fiscal year, operation income dropped 146%, from a loss of $738 million to a loss of $1.814 billion.

The continued income losses are due to the consolidation of Hulu and the costs from Disney+ and additional expenses from ESPN+.

Media Networks

The Media Networks division brought in $6.510 billion in revenues this quarter compared to $5.325 billion, a gain of 22% over 2018’s fourth quarter; revenue was up 13% for the fiscal year, from $7.312 billion to $8.341 billion. Segment operating income for the division’s Q4 dropped slightly over last year — $1.783 billion down from $1.842 billion; for the fiscal year, income was up slightly, at $7.479 billion from $7.338 billion.

At the cable networks, lower operating income was due to a decrease at ESPN, with increased costs in programming, production and marketing. Revenue growth was due to an increase in contractual rates, which was partially offset by a decrease in subscribers.

The decrease in income at the broadcast networks was due to lower sales of ABC Studios content, plus increased programing and production costs at the ABC Network.

Studio Entertainment

Studio Entertainment was up significantly compared to last year. Quarterly revenues increased 52% from last year, from $2.177 billion to $3.310 billion; there was a modest 11% gain in revenue for the fiscal year, from $10.065 billion to $11.127 billion. Operating income jumped 79%, from $604 million to $1.079 billion; income for the fiscal year, however, was down 11% compared to last year from $3.004 billion to $2.686 billion.

The 4th quarter theatrical results compared the performance of The Lion King, Toy Story 4 and Aladdin to last year’s Incredibles 2 and Ant-Man and The Wasp. Gains were offset by loses from the performance of Fox properties.

Announcements

• Beginning in March, Hulu will be the official streaming home for the FX Networks, including new and classic programming.
• Disney+ will be available in the United Kingdom, Germany, France, Italy, Spain and more European countries beginning March 31st.
• In addition to previously announced platforms, Disney+ will be available on Amazon Fire, Samsung, and LG devices.

Q&A

• When asked about the contributions of Marvel and Lucasfilm and if investors will see a gap period, Iger said that he thinks of them as more than just films or film franchises. He added that there will be a lot of activity on the television and streaming from for both Star Wars and Marvel, plus while there are no Avengers films, there will be more Marvel films on the way, including Black Widow and another Thor film.
• When asked to discuss early Disney+ signups, Iger shared that he feels consumers are being drawn to the content, and that the price has been met with enthusiasm, however there are still a relatively small number of subscribers. He added that in a recent test in The Netherlands, the demographics using the streaming service were broader than expect, plus the brands that the users selected were also very broad.
• Following up on the announcement of FX content heading to Hulu, Iger was asked if that’s where all Fox movies will go. Iger replied that there is a deal with HBO that is in place for another couple of years, but after that, Fox content on Hulu is likely.
• When asked about the lower attendance at Disneyland and the outlook for pricing, Iger reiterated his statements about ticket pricing being a strategy to spread out demand. He also added that many consumers delayed visits to both coasts in anticipating of Star Wars: Rise of the Resistance.
• Iger commented that Disney+ is a robust platform is ready for the scale of usage it will see on November 12th.
• Iger said that the Disney company as the unique ability to use multiple platforms to reach more consumers, and there may be some crossover.
• McCarthy shared that, based on guest satisfaction service and booking trends, they still feel very good about the demand for the domestic parks.

Source: The Walt Disney Company