There’s No Magic in Disney’s Third-Quarter Earnings

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Disney (NYSE:DIS) closed the regular session up 1.53 percent on Tuesday and edged fractionally lower in post-market trading following a mixed fiscal third-quarter earnings report. Revenues increased 4 percent on the year to $$11.58 billion, missing the average analyst estimate of $11.64 billion.

Earnings were flat at $1.01 per diluted share, consistent with analyst expectations. However, while the top and bottom line didn’t see much movement, free cash flow increased 27 percent on the year to $2.72 billion. Third-quarter investments in parks, resorts, and other properties declined by about $1 billion on the year to $1.8 billion.

By segment, Media Networks remained the most lucrative, growing revenues 5 percent on the year to $5.35 billion, or 46 percent of total revenues. Media Networks Operating Income increased 8 percent on the year to $2.3 billion. Revenues from Parks and Resorts increased 7 percent on the year to $3.68 billion, and operating income increased 9 percent to $689 million. Revenues from Consumer Products increased 4 percent on the year to $775 million, and operating income increased 5 percent to $219 million.

Third-quarter revenue at Disney’s Studio Entertainment segment declined 2 percent on the year to $1.60 billion, and operating income declined 36 percent to $201 million. Revenue from the Interactive segment declined 7 percent to $183 million, and operating income declined 38 percent to a loss of $58 million.

While the second-quarter picture is somewhat underwhelming, Disney’s half-year numbers are more positive all around. Every segment reported a revenue increase in the first half of the year, while operating income only fell at Studio Entertainment, down 14 percent on a 1 percent revenue increase.

Disney’s Media Networks department is broken down into two segments: cable and broadcast. Disney’s cable networks increased revenues by 8 percent in the first half of the year and increased operating income by 10 percent. Broadcasting revenues increased just 1 percent over the same period, and operating income actually fell 15 percent. Cable networks accounts for about 70 percent of revenues and about 89 percent of operating income.

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