A Magical Fiscal Q2 For Disney As Net Income, Revs Rise

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Steamboat Willie is sailing full-steam ahead, as Mickey, Belle boosted both ABC and beleaguered sports network ESPN in bringing The Walt Disney Co. fiscal Q2 results that were far from beastly.


The entertainment and media company reported following Tuesday’s Closing Bell on Wall Street largely positive results, as net revenue improved 3%, to $13.34 billion, narrowly missing the Street. Net income rose 11%, to $2.39 billion ($1.50 per diluted share), from $2.14 billion ($1.30).

The results surpassed the expectations of nine analysts surveyed by Zacks Investment Research. They predicted earnings of $1.45 per diluted share.

Five analysts surveyed by Zacks expected net revenue of $13.48 billion.

Free Cash Flow rose 7%, to $2.6 billion, as Disney’s studio — fueled by the Emma Watson-helmed Beauty and the Beast — and its theme parks drove the company’s strong performance, Chairman/CEO Bob Iger said.

Still, Disney’s Media Networks saw 3% revenue growth in Q2, to $5.9 billion.

But here’s the killer: The Media Networks arm saw its segment operating income fall by 3%, year over year, to $2.22 billion.

This division is comprised of Disney’s cable networks and broadcasting, and it’s clear that ESPN is dragging down the entire segment.

While broadcasting revenue increased 3%, to $1.88 billion, and Segment Operating Income (SOI) jumped ahead 14%, to $344 million, it’s a slightly different picture for its cable networks.

At the cable networks, which include not only ESPN but also Disney Channel and Disney XD, revenue increased 3%, to $4.06 billion. However, SOI slipped 3%, to $1.79 billion. The company said that increases at the Disney Channels and Freeform offset losses at ESPN.

Why is ESPN the problem child for Disney?

Higher programming costs are a factor, and Disney said the increase was tied to a timing difference compared to 2016 of NCAA Men’s College Football bowl games and contractual rate increases for NBA programming.

ESPN is not the only trouble spot for Disney. Its Consumer Products and Interactive Media division saw net revenue tumble 11% in fiscal Q2, to $1.06 billion, and net income inch ahead 3%, to $367 million.


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