Disney profits sky high

Television IndustryAmusement and Theme ParksEntertainmentFinanceCompanies and CorporationsTelevisionESPN

Strength at ESPN, improvements in the ABC television network and steady performance at Walt Disney World in Orlando helped Walt Disney Co. post a surprisingly strong 41 percent boost in profit in the third quarter.

In his final earnings report as Disney's top boss, outgoing Chief Executive Officer Michael Eisner said Tuesday the diversified media-entertainment company is benefiting from long-term investments made in recent years and now is "extremely well positioned for ongoing growth."

Profit rose to a record $851 million, or 41 cents a share, up from $604 million, or 29 cents, in the same period a year ago. Revenue rose 3 percent to $7.7 billion.

Total profit in the quarter ended July 2 beat the 38-cent average estimate of 20 analysts surveyed by Thomson Financial.

Disney President Robert Iger, who this fall is taking the reins at the Burbank Calif.-based media giant, said the parks and resort division's expansion internationally will help keep the momentum going as the company prepares to open Hong Kong Disneyland next month.

Disney is investing $315 million for a 43 percent ownership stake in the Hong Kong park and in return will reap royalties on various revenue streams ranging from 5 percent to 10 percent, along with management fees. That, Iger said, should help drive "double-digit returns on our invested capital."

Meanwhile, Iger said, international visitation to the United States is rebounding and helping U.S. theme parks contribute to the company's bottom line. "We're seeing nice double-digit growth, particularly to Orlando," Iger said of international traffic.

Overall, the parks and resort division operating profit rose 6 percent to $448 million, and revenue rose 7 percent to $2.4 billion.

Chief Financial Officer Tom Staggs noted that June was the wettest for that key travel month in Orlando since Disney World opened in 1971; otherwise, the division may have done even better.

The company does not report attendance, but the domestic parks during the quarter saw attendance increase 3 percent from the same period a year ago, Staggs said, and spending was up 4 percent.

Hotel occupancy at Disney World was up about 4 percentage points and per person spending at Disneyland was up about 11 percent, helping to boost revenue and overcome increased costs at both resorts as well as $25 million in pre-opening costs at Hong Kong Disneyland.

Disney's Magical Express bag-handling and shuttle service was launched at Disney World during the quarter, company officials noted, and is having a positive effect on spending at the park.

Profit at Disney's media networks unit, which includes ESPN and ABC, rose 48 percent to $998 million, beating analysts' estimates. The increase was driven mainly by higher rates paid by cable operators for ESPN and higher advertising revenue at ABC.

The gains countered declines at Disney's film unit, where home-video sales of films it distributed, including Pixar's The Incredibles, failed to match titles released last year including Finding Nemo.

"Home video was a disappointment for almost every studio," said Jack Liebau, president of Liebau Asset Management LLC in Pasadena, Calif., which owns Disney shares. "The biggest surprise came from the media networks, which showed continued profit performance at ESPN and continued improvement at ABC."

Disney's TV business increased revenue 16 percent to $3.39 billion.

Disney has relied on sales and profit increases at ESPN to bolster results for six of the past seven quarters.

"ESPN ranks highest" in profitability and opportunity for growth among all cable networks, said Lawrence Haverty, an analyst at Rye, New York-based Gabelli Asset Management, which owns 5.33 million Disney shares.

The company confirmed reports that it was considering selling its ABC radio stations.

Staggs, the CFO, said the company was talking with several parties about possibly combining Disney's radio assets with those from another company or selling them outright.

Staggs said neither the Radio Disney network nor the ESPN radio network would be part of any deal.

Disney's smallest unit, the consumer products division, managed to turn an operating profit but it was down 20 percent to $61 million, and revenue slipped 23 percent to $418 million.

Jerry W. Jackson can be reached at jwjackson@orlandosentinel.com or 407-420-5721. Information from The Associated Press and Bloomberg News was used in this report.

Copyright © 2014, Los Angeles Times
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