Walt Disney Company (DIS) Earnings Preview: Q3 2014 Profits Score With World Cup, ‘Frozen’

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The Walt Disney Company is expected to report higher profits on Tuesday thanks to the continued success of 'Frozen' and ESPN’s World Cup coverage. Reuters

For Disney, “Frozen” fever was the gift that kept on giving -- but an extra kick from soccer mania didn’t hurt.  

The Walt Disney Company (NYSE:DIS) is expected to report higher profits on Tuesday as “Frozen”-related sales boosted revenue for the third quarter in a row. The Burbank, California, company also saw help from the continued growth of per-guest spending at its theme parks, as well as broadcasts of the FIFA World Cup, which netted record audiences for ESPN despite a downward trend in summer television viewership across the board.

Analysts polled by Thomson Reuters expect Disney to book net income of $2.04 billion, or $1.64 per share, for the period ended June 30. That’s a 13 percent increase over the same period last year, when Disney reported net income of $1.89 billion, or $1.03 per share. Revenue is expected to rise 5.1 percent to $12.17 billion, from $11.58 billion a year earlier.

Disney will report financial results on Tuesday at 4:15 p.m. EDT. Bob Iger, the company’s chairman and chief executive, will lead a live webcast at 5 p.m. EDT.

Revenue for Disney’s largest division, Media Networks, is expected to see a 3 percent uptick to $5.51 billion, Laura Martin, an analyst at Needham & Co., said in an investor's note. The unit, which comprises about 45 percent of Disney’s revenue, was aided by ESPN’s coverage of the World Cup. The quadrennial soccer tournament is increasingly popular with U.S. audiences. Broadcasts began on June 12 and lasted through the end of the quarter, netting record ratings for Disney’s powerhouse sports network.  

The boost, however, was bittersweet in an otherwise troubling environment, Marci Ryvicker, a media analyst at Wells Fargo, said in an investor's note. Across the board, major media companies posted year-over-year declines for both cable and broadcast ratings, with viewership at 21st Century Fox Inc. (NASDAQ:FOXA), Time Warner Inc. (NYSE:TWX) and the NBCUniversal unit of Comcast Corporation (NASDAQ:CMCSA) all posting double-digit drops.

Exactly what is causing the declines is unclear, but Ryvicker theorized that traditional networks may be feeling the effects of emerging TV-streaming services from Netflix Inc. (NASDAQ:NFLX), Amazon.com Inc. (NASDAQ:AMZN) and others. “Of all the companies we cover, it is no surprise that Disney was the top performer in the quarter, the driving force being sports -- particularly the World Cup and NBA Playoffs/Finals on ABC and ESPN,” Ryvicker wrote. “The real question here is whether or not these sports programs displaced traditional viewership, or if viewership in general is going elsewhere at an accelerated pace.”

Disney’s Parks & Resorts unit is expected to see another banner quarter, with revenue up 9 percent to $3.99 billion, Martin said. The rise came, in part, because of a later Easter season in 2014, which boosted April attendance at Disney theme parks. Greater efficiency may also be playing a role: Earlier this year, Disney unveiled its MyMagic+ attendance-management system, which uses RFID-enabled bracelets to track guest purchases and whereabouts. Although the $1 billion system has been dogged by unexpected technical hurdles and criticism from privacy advocates, such setbacks have so far been offset by higher ticket prices and increased attendance at the Walt Disney World resort near Orlando, Florida.

“After a major round of parks upgrades in recent years, we see enhanced return on invested capital, combined with ample financial flexibility on further acceleration in free cash flow,” Tuna Amobi, an equity analyst at  S&P Capital IQ, wrote in a July stock report.

Continued growth at Disney’s Parks & Resorts unit has defied downward trends for competitors such as Six Flags and SeaWorld, the latter of which has struggled in the face of intense criticism from animal-rights advocates who object to keeping whales in captivity.

Finally, continued revenue from the animated hit “Frozen” gave yet another quarterly jolt to Disney’s Studio Entertainment and Consumer Products units, which are expected to post revenue gains of 5 percent to $1.68 billion and 9 percent to $844 million, respectively.

With a Disney-run tours to Norway, a Broadway musical in the works, and a worldwide box-office gross of more than $1.27 billion, “Frozen” is a veritable global phenomenon, with no signs of thawing out anytime soon.  

Shares of Disney closed at $85.38 on Friday, down 0.58 percent.

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