Disney 4th-Qtr Profit Jumps 24% as ESPN Sales Rise (Update3) ListenListen
Nov. 18 (Bloomberg) -- Walt Disney Co., the world's second- largest media company, said fiscal fourth-quarter profit rose 24 percent as its cable networks including ESPN and the Disney Channel boosted advertising sales.
Net income increased to $516 million, or 25 cents a share, in the quarter ended Sept. 30, from $415 million, or 20 cents, a year earlier, the company said today in a statement. Burbank, California-based Disney said sales rose 7.5 percent to $7.54 billion from $7.01 billion.
Disney, led by Chief Executive Michael Eisner, benefited from higher ad sales and affiliate fees at its cable networks including sports channel ESPN. Disney's consumer products unit, which licenses products to retailers such as Wal-Mart Stores Inc., and the company's theme parks also contributed to the higher profit.
ESPN ``has a unique set of very well-defined viewers. That's something advertisers like,'' JB Hanauer & Co. analyst David Joyce said in an interview. ``There's no other national sports network like it.''
Joyce, who rates Disney shares ``market perform,'' said ESPN can charge higher ad rates because it's increasing the size of its audience.
ESPN is ``one of their biggest drivers,'' Angela Kohler, an analyst with Federated Investors Inc. in Pittsburgh, said before the announcement. Federated owns 5.74 million Disney shares.
Income Tax Settlement
Profit in the quarter included $120 million, or 6 cents a share, from an income tax settlement. In the year-earlier quarter, earnings per share included a 4-cent cost to write off the value of an aircraft lease investment and a 3-cent benefit from an income tax settlement.
Disney Chief Financial Officer Thomas Staggs said in an interview that Disney's profit of 19 cents a share, excluding the tax settlement, compares with 18 cents a share, or $376.5 million, the average estimate of analysts surveyed by Thomson Financial.
Disney was expected to report sales of $7.57 billion, according to Thomson. Of the 28 analysts tracked by Bloomberg, 15 rate Disney shares ``buy,'' 12 recommend ``hold'' and one rates the stock ``sell.''
Shares Rise
Disney shares rose 33 cents to $26.70 in extended trading at 6:33 p.m. New York time, after the company announced its results. Earlier they fell 19 cents to $26.37 in New York Stock Exchange composite trading.
Disney shares have risen 17 percent in the past year through the NYSE close, compared with a 14 percent gain in the Standard & Poor's 500 Index and a 13 percent increase in the shares of New York-based Time Warner Inc., the largest media company.
Operating profit at Disney's media networks unit, which includes ESPN and broadcaster ABC, rose 50 percent to $448 million. Operating profit is earnings before interest and taxes. Sales rose 10 percent to $2.89 billion.
``ESPN growth was great,'' Staggs said in the interview. ``The best advertising gains were at the cable networks.''
Disney said higher ad rates, lower costs for rights to televise sports and higher fees charged to affiliates, such as cable- and satellite-TV operators, boosted profit at the ESPN sports channel. Disney also benefited from revenue growth at the ABC broadcast network and ABC Family cable channel.
Higher revenue from fees to distribute the Disney Channel in the U.S. and in international markets helped results as well.
Film Profit Plunges
Operating profit at Disney's studio division, which includes Walt Disney Studios and Miramax Films, fell 89 percent to $23 million from a year earlier. Studio revenue fell 14 percent to $1.88 billion.
Disney attributed the drop to lower worldwide home-video and box-office results.
The company's box-office sales in the U.S. and Canada through Sept. 30 fell 47 percent to $902 million, dropping Disney to third place among studios from first in 2003, when it had $1.7 billion in domestic ticket sales, Los Angeles-based market tracker Nielsen EDI said.
``Mr. 3000,'' a baseball comedy featuring Bernie Mac, brought in $21.6 million domestically in the quarter. The company's top- grossing film in the period was ``The Village'' at $114.1 million.
A year earlier, ``Finding Nemo,'' created by Pixar Animation Studios and distributed by Disney, generated $339.7 million in domestic ticket sales, while ``Pirates of the Caribbean: The Curse of the Black Pearl'' grossed $305.4 million.
Parks Profit Rises 25%
Disney's park unit, including Walt Disney World and California's Disneyland, generated operating profit of $282 million, up 25 percent. Sales rose 31 percent to $2.16 billion.
Disney shut its Walt Disney World resort for three days because of Florida hurricanes, cutting profit by 1 cent a share.
Quarterly operating profit at Walt Disney World, the company's largest resort, fell ``slightly'' because of lower attendance from the Florida hurricanes, the company said. Increased ticket prices boosted results at Disneyland.
All of Disney's Florida parks closed early on Aug. 13, and Animal Kingdom remained closed the next day because of Hurricane Charley. Walt Disney World closed on Sept. 4 and 5, and some of the parks closed on Sept. 6, because of Hurricane Frances. Hurricane Jeanne forced the resort to close on Sept. 26.
Analyst Kohler said results at some units, such as parks and the broadcast and cable units, will increase this fiscal year.
``What we've seen is travel trends in Florida remain strong,'' she said.
CFO Staggs said attendance so far in the fiscal first quarter increased by a ``single digit'' percentage from a year earlier. In the first, second and third quarters, bookings have increased by a ``low double-digit'' percentage.
Consumer Products
Disney's consumer products unit, which includes products licensed to retailers, posted operating profit of $146 million, up 43 percent. Revenue rose 10 percent to $618 million.
Paul Kim, an analyst at Tradition Asiel Securities in New York who rates Disney ``sell,'' said the shares have risen in recent months because of successful films and TV shows that were released after the end of the fiscal fourth quarter.
The company's latest animated film from Pixar, ``The Incredibles,'' opened Nov. 5 as the No. 1 movie in the U.S. and Canada and has sold $143.3 million in tickets through Nov. 14.
The ABC network has introduced two new hit shows, the evening soap opera ``Desperate Housewives'' and the plane-crash drama ``Lost.'' ``Desperate Housewives'' is tied for second place in the TV season that started in September, and ``Lost'' is ninth.
``Right now there's a lot of positive sentiment within Disney, so anytime something happens, everything is looked upon very favorably,'' Kim said before the announcement. ``The earnings growth of ABC is already factored in.''
Disney has reiterated its forecast that ABC will return to profitability in fiscal 2005.
Eisner, 62, who announced during the quarter that he will step down by September 2006, has been chief executive since 1984.
He's testifying this week in a lawsuit seeking to recoup a $140 million severance package paid to former Disney President Michael Ovitz. The suit claims the payment was excessive and Eisner exerted too much influence in Ovitz's hiring and firing.
(Disney executives held a conference call to discuss the results on Thursday, Nov. 18. A replay of the call will be available through Nov. 25 at (1)(877) 519-4471 or (1)(973) 341-3080, using passcode 5270115, or at http://www.disney.com/investors .)
Nov. 18 (Bloomberg) -- Walt Disney Co., the world's second- largest media company, said fiscal fourth-quarter profit rose 24 percent as its cable networks including ESPN and the Disney Channel boosted advertising sales.
Net income increased to $516 million, or 25 cents a share, in the quarter ended Sept. 30, from $415 million, or 20 cents, a year earlier, the company said today in a statement. Burbank, California-based Disney said sales rose 7.5 percent to $7.54 billion from $7.01 billion.
Disney, led by Chief Executive Michael Eisner, benefited from higher ad sales and affiliate fees at its cable networks including sports channel ESPN. Disney's consumer products unit, which licenses products to retailers such as Wal-Mart Stores Inc., and the company's theme parks also contributed to the higher profit.
ESPN ``has a unique set of very well-defined viewers. That's something advertisers like,'' JB Hanauer & Co. analyst David Joyce said in an interview. ``There's no other national sports network like it.''
Joyce, who rates Disney shares ``market perform,'' said ESPN can charge higher ad rates because it's increasing the size of its audience.
ESPN is ``one of their biggest drivers,'' Angela Kohler, an analyst with Federated Investors Inc. in Pittsburgh, said before the announcement. Federated owns 5.74 million Disney shares.
Income Tax Settlement
Profit in the quarter included $120 million, or 6 cents a share, from an income tax settlement. In the year-earlier quarter, earnings per share included a 4-cent cost to write off the value of an aircraft lease investment and a 3-cent benefit from an income tax settlement.
Disney Chief Financial Officer Thomas Staggs said in an interview that Disney's profit of 19 cents a share, excluding the tax settlement, compares with 18 cents a share, or $376.5 million, the average estimate of analysts surveyed by Thomson Financial.
Disney was expected to report sales of $7.57 billion, according to Thomson. Of the 28 analysts tracked by Bloomberg, 15 rate Disney shares ``buy,'' 12 recommend ``hold'' and one rates the stock ``sell.''
Shares Rise
Disney shares rose 33 cents to $26.70 in extended trading at 6:33 p.m. New York time, after the company announced its results. Earlier they fell 19 cents to $26.37 in New York Stock Exchange composite trading.
Disney shares have risen 17 percent in the past year through the NYSE close, compared with a 14 percent gain in the Standard & Poor's 500 Index and a 13 percent increase in the shares of New York-based Time Warner Inc., the largest media company.
Operating profit at Disney's media networks unit, which includes ESPN and broadcaster ABC, rose 50 percent to $448 million. Operating profit is earnings before interest and taxes. Sales rose 10 percent to $2.89 billion.
``ESPN growth was great,'' Staggs said in the interview. ``The best advertising gains were at the cable networks.''
Disney said higher ad rates, lower costs for rights to televise sports and higher fees charged to affiliates, such as cable- and satellite-TV operators, boosted profit at the ESPN sports channel. Disney also benefited from revenue growth at the ABC broadcast network and ABC Family cable channel.
Higher revenue from fees to distribute the Disney Channel in the U.S. and in international markets helped results as well.
Film Profit Plunges
Operating profit at Disney's studio division, which includes Walt Disney Studios and Miramax Films, fell 89 percent to $23 million from a year earlier. Studio revenue fell 14 percent to $1.88 billion.
Disney attributed the drop to lower worldwide home-video and box-office results.
The company's box-office sales in the U.S. and Canada through Sept. 30 fell 47 percent to $902 million, dropping Disney to third place among studios from first in 2003, when it had $1.7 billion in domestic ticket sales, Los Angeles-based market tracker Nielsen EDI said.
``Mr. 3000,'' a baseball comedy featuring Bernie Mac, brought in $21.6 million domestically in the quarter. The company's top- grossing film in the period was ``The Village'' at $114.1 million.
A year earlier, ``Finding Nemo,'' created by Pixar Animation Studios and distributed by Disney, generated $339.7 million in domestic ticket sales, while ``Pirates of the Caribbean: The Curse of the Black Pearl'' grossed $305.4 million.
Parks Profit Rises 25%
Disney's park unit, including Walt Disney World and California's Disneyland, generated operating profit of $282 million, up 25 percent. Sales rose 31 percent to $2.16 billion.
Disney shut its Walt Disney World resort for three days because of Florida hurricanes, cutting profit by 1 cent a share.
Quarterly operating profit at Walt Disney World, the company's largest resort, fell ``slightly'' because of lower attendance from the Florida hurricanes, the company said. Increased ticket prices boosted results at Disneyland.
All of Disney's Florida parks closed early on Aug. 13, and Animal Kingdom remained closed the next day because of Hurricane Charley. Walt Disney World closed on Sept. 4 and 5, and some of the parks closed on Sept. 6, because of Hurricane Frances. Hurricane Jeanne forced the resort to close on Sept. 26.
Analyst Kohler said results at some units, such as parks and the broadcast and cable units, will increase this fiscal year.
``What we've seen is travel trends in Florida remain strong,'' she said.
CFO Staggs said attendance so far in the fiscal first quarter increased by a ``single digit'' percentage from a year earlier. In the first, second and third quarters, bookings have increased by a ``low double-digit'' percentage.
Consumer Products
Disney's consumer products unit, which includes products licensed to retailers, posted operating profit of $146 million, up 43 percent. Revenue rose 10 percent to $618 million.
Paul Kim, an analyst at Tradition Asiel Securities in New York who rates Disney ``sell,'' said the shares have risen in recent months because of successful films and TV shows that were released after the end of the fiscal fourth quarter.
The company's latest animated film from Pixar, ``The Incredibles,'' opened Nov. 5 as the No. 1 movie in the U.S. and Canada and has sold $143.3 million in tickets through Nov. 14.
The ABC network has introduced two new hit shows, the evening soap opera ``Desperate Housewives'' and the plane-crash drama ``Lost.'' ``Desperate Housewives'' is tied for second place in the TV season that started in September, and ``Lost'' is ninth.
``Right now there's a lot of positive sentiment within Disney, so anytime something happens, everything is looked upon very favorably,'' Kim said before the announcement. ``The earnings growth of ABC is already factored in.''
Disney has reiterated its forecast that ABC will return to profitability in fiscal 2005.
Eisner, 62, who announced during the quarter that he will step down by September 2006, has been chief executive since 1984.
He's testifying this week in a lawsuit seeking to recoup a $140 million severance package paid to former Disney President Michael Ovitz. The suit claims the payment was excessive and Eisner exerted too much influence in Ovitz's hiring and firing.
(Disney executives held a conference call to discuss the results on Thursday, Nov. 18. A replay of the call will be available through Nov. 25 at (1)(877) 519-4471 or (1)(973) 341-3080, using passcode 5270115, or at http://www.disney.com/investors .)