The Walt Disney Co
Disney shares jumped about 4 percent in after-hours trade on the company's earnings results, which beat Wall Street forecasts. Revenue dropped 7 percent and missed expectations.
A relatively strong showing at its cable operations, especially the ESPN sports network, ABC Family Channel and Disney Channel, and a better-than-expected 10 cents per share of restructuring charges helped the company to an earnings beat.
The stock is indicated up, likely on a relief rally that they didn't miss so materially once again. A lot of analysts thought they'd miss a third time, said David Miller with Caris & Co. From a restructuring charge perspective, they actually beat consensus.
The media networks arm of the No. 1 U.S. entertainment conglomerate bucked expectations for the quarter with a 2 percent rise in revenue and a tiny 4 percent decrease in operating profit, despite a global advertising downturn.
They beat on low expectations. I think that is what we are seeing in media and consumer discretionary companies, Edward Jones analyst Robin Diedrich said.
Overall, the numbers are not good in advertising and the parks, and that's where we thought the weakness would be.
Net income fell to $613 million, or 33 cents per share, from $1.13 billion, or 58 cents per share, a year earlier. But excluding restructuring and impairment charges of 10 cents per share, Disney's profit came to 43 cents per share.
Revenue fell to $8.09 billion, partly the result of aggressive discounting at domestic theme parks.
Analysts, on average, had expected earnings, excluding items, of 40 cents per share on revenue of $8.14 billion, according to Reuters Estimates.
Severance and related costs accounted for most of the restructuring charges as the media and tourism giant trims its workforce and consolidates operations.
DOWNTURN HAS STABILIZED
Disney Chief Executive Robert Iger told analysts the company sees some sign the economic downturn has stabilized but added it was too early to make predictions about the time and pace of the recovery.
Iger and Chief Financial Officer Tom Staggs said the pace of decline in advertising sales has generally stabilized and that room reservations at Disney's U.S. parks for the second half of 2009 were nearly on par with last year.
Staggs did not, however, deliver a customary outlook for ad sales and pricing for the ABC broadcast network, saying only that sales were down modestly versus the prior year.
Staggs indicated the company still plans to end deep hotel discounts at Walt Disney World in August, as planned, but did not rule out future park promotions to drive attendance.
We'll have to read the marketplace as we get there and take a look and make those decisions as we go, Staggs said.
The studio division has a less favorable release slate in home video and TV distribution in the third quarter, he said.
Both executives saw a possible continuation of cost cutting with Iger mentioning possible cuts to the studios' output.
Iger also said the company was optimistic that an agreement would be reached with the Hong Kong government to expand the underperforming Hong Kong theme park, and that the proposed Shanghai park was awaiting approval from China's central government.
Revenue for Disney's theme parks, seen as a bellwether for the company and the economy, dropped 12 percent while segment operating income fell 50 percent from declines at its domestic parks, Disney Vacation Club and Paris resort as well as a shift in the Easter holiday to the third quarter in 2009.
The movies studios reported a 21 percent decline in revenue coupled with a disastrous 97 percent plunge in operating income due to a weaker box office and DVD sales of titles such as High School Musical 3, Beverly Hills Chihuahua, Confessions of a Shopaholic and Bolt, and higher distribution costs.
Weaker consumer spending hit the company's consumer products licensing business, which posted a 9 percent increase in revenue but a 24 percent downturn in operating income. Revenue from Interactive Media fell 17 percent while the segment's operating loss stayed flat, the company said.
Shares of Disney rose nearly 4 percent to $24.02 in after-hours trade, after closing up 1.3 percent at $23.15 on the New York Stock Exchange.
(Reporting by Gina Keating and Sue Zeidler; Editing by Edwin Chan, Richard Chang and Steve Orlofsky)