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Theme Parks Keep Bailing Disney Out

By Rick Munarriz - Feb 7, 2018 at 10:08AM

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Back out Disney's theme parks and resorts business, and the media giant's revenue and segment operating income would've declined in Q1.

Flying banshees, spinning teacups, and an audio-animatronic Donald Trump are what's keeping Walt Disney (DIS -0.71%) growing these days. Disney posted financial results for its fiscal first quarter on Tuesday afternoon, and once again it was the media giant's theme parks and resorts segment saving the day.

Disney's revenue rose a lighter than expected 3.8%, and its segment operating income inched a mere 0.8% higher. However, if you back out Disney's booming theme parks business we see revenue declining 0.3% and a 7.3% drop in segment operating income. The House of Mouse hitting on a single cylinder isn't pretty, but at least it's enough to keep Disney moving in the right direction.

Spaceship Earth at Disney World's EPCOT.

Image source: Disney.

It's a great big beautiful tomorrow

Theme parks are killing it for Disney. The segment's revenue rose 13% to hit nearly $5.2 billion, accounting for more than a third of total revenue for the first time in a long time. What's even more surprising is that the 21% surge in segment operating income also accounted for more than a third of the total segment operating profit. Disney's theme parks business has historically been a low-margin endeavor relative to its cable networks and broadcasting strongholds, but that wasn't the case this time. 

A good chunk of the segment's growth was the result of sandbagged results a year earlier. Disney had one of its ships dry-docked for a chunk of the prior year's fiscal first quarter and there were Disney World closures related to Hurricane Matthew in October of 2016. Disney also had a new timeshare for its Disney Vacation Club to sell this time around. However, it was still a spectacular showing for a company that may not be blowing the cover off the ball in terms of attendance growth but it's excelling at getting visitors to pay more once they're at the resort. 

This is all starting to become routine. Disney's theme parks segment was the only business to grow its revenue and operating income in the fourth quarter of fiscal 2017 as well for all of fiscal 2017. That wasn't technically the case this time around given the 0.2% increase in revenue for Disney's media networks division, but everything else outside of that was negative again for the market bellwether. Shareholders better hope that things don't stay that way. The inability for Star Wars: The Last Jedi to lift Disney's studio higher and another problematic dip in consumer products place more of a burden on the theme parks. Disney's global collection of high-tech rides and attractions are up to the task now, but it's going to be a different story if the economy or global tourism trends go soft.

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