Walt Disney (DIS 0.16%) reported its fiscal second-quarter 2018 financial results after the market closed on Tuesday. The entertainment giant's revenue increased 9% year over year, while earnings per share adjusted for one-time factors jumped 23%. EPS on a GAAP basis surged 30%.
Driven by strength in its parks and movie businesses, Disney continued its winning streak that started last quarter. Last fiscal year, the company's annual revenue and profits edged down slightly year over year.
Image source: Disney.
Disney's key quarterly numbers
|
Metric |
Fiscal Q2 2018 |
Fiscal Q2 2017 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$14.55 billion |
$13.34 billion |
9% |
|
Segment operating income |
$4.24 billion |
$4.0 billion |
6% |
|
Net income |
$2.94 billion |
$2.39 billion |
23% |
|
GAAP EPS |
$1.95 |
$1.50 |
30% |
|
Adjusted EPS |
$1.84 |
$1.50 |
23% |
Data source: Disney.
Adjusted EPS excludes the boost to earnings from the recent tax reform and other items affecting comparability with the year-ago quarter.
Disney doesn't provide guidance. For some context (though long-term investors shouldn't place too much emphasis on Wall Street's near-term estimates), analysts were looking for adjusted EPS of $1.69 on revenue of $14.08 billion. So the company beat the top-line expectation, and cruised by the bottom-line consensus.
Here's how the three largest segments performed.
Media networks: Cable's profit continues to slide
|
Metric |
Fiscal Q2 2018 |
Year-Over-Year Change |
|---|---|---|
|
Revenue |
$6.14 billion |
3% |
|
Operating income |
$2.08 billion |
(6%) |
Data source: Disney.
Here's how the two businesses within this segment did:
|
Business/Metric |
Fiscal Q2 2018 |
Year-Over-Year Change |
|---|---|---|
|
Cable networks revenue |
$4.25 billion |
5% |
|
Cable networks operating income |
$1.73 billion |
(4%) |
|
Broadcast networks revenue |
$1.89 billion |
-- |
|
Broadcast networks operating income |
$343 million |
-- |
|
Equity in the income of investees (an operating income line item) |
$13 million |
(85%) |
Data source: Disney.
There were no surprises on the media business front, with cable's decline in profits continuing. The prime culprit is well known by now: a dwindling number of subscribers to cable channels, particularly ESPN, due to consumers increasingly flocking to video streaming.
Cable's operating income results were also adversely affected by an operating loss at BAMTech, the video streaming company in which Disney owns a controlling stake. Disney has been investing significantly in the streamer's technology platform, which will power the media titan's subscription streaming offerings. In mid-April, Disney launched its sports-focused over-the-top service, ESPN Plus, for $4.99 per month, and it plans to roll out a broader service in 2019. As to ESPN Plus, Disney CEO Bob Iger said on the earnings call that reception has been good.
Parks and resorts: Still wearing its Disney-financial-results superhero cape
|
Metric |
Fiscal Q2 2018 |
Year-Over-Year Change |
|---|---|---|
|
Revenue |
$4.88 billion |
13% |
|
Operating income |
$954 million |
27% |
Data source: Disney
As has been typical for some time, this reliable grower more than made up for cable's declining profits. Both the domestic and international businesses grew operating income, though results also got a boost from the shift in the timing of the Easter holiday relative to the company's fiscal periods.
Domestic results were bolstered by increased guest spending and attendance at Disney World. International results were driven by growth at Disneyland Paris, and higher occupied room nights and attendance at Hong Kong Disneyland. These increases were partly offset by a decline in profits at Shanghai Disney, driven by lower attendance, cost inflation, and an unfavorable foreign currency impact. Unfavorable weather early in the quarter was largely to blame, CFO Christine McCarthy said on the earnings call. Moreover, she added the park experienced a "nice recovery" in attendance starting in March.
Studio entertainment: The mojo is back!
|
Metric |
Fiscal Q2 2018 |
Year-Over-Year Change |
|---|---|---|
|
Revenue |
$2.45 billion |
21% |
|
Operating income |
$847 million |
29% |
Data source: Disney.
The studio business roared back to growth after having a challenging first quarter and fiscal 2017 due to extremely tough year-over-year comparables. Growth was driven by the smashing box-office success of Marvel's Black Panther, which has taken in global receipts of more than $1.3 billion and is currently this year's highest-grossing movie. There was no comparable Marvel title in theaters in the year-ago quarter. Black Panther's powerful performance more than offset the disappointing results from A Wrinkle in Time, which fell far short of Beauty and the Beast's performance in the prior-year quarter.
Operating income also got a boost from home entertainment and TV/SVOD (subscription video on demand) distribution results.
Looking ahead
Disney had a great quarter. On the immediate horizon, Marvel's blockbuster, Avengers: Infinity War, released in April, should help power third-quarter results. It's garnered $1.2 billion in global ticket sales, so it's nipping on Black Panther's heels. And Solo: A Star Wars Story is scheduled for a Memorial Day weekend opening.
As to the pending acquisition of the entertainment assets of Twenty-First Century Fox, Iger said on the earnings call that it's "still deep in the regulatory process."
