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June 23, 2017

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'Frozen' helps raise Disney's earnings in Q2

LOS ANGELES--Disney on Tuesday posted second-quarter earnings that beat Wall Street forecasts, helped by the home video sales of blockbuster movies "Frozen" and "Thor: The Dark World."

Both films showed the power of buying multibillion-dollar content brands. "Thor" comes from Disney's US$4 billion purchase of Marvel Entertainment in 2009. "Frozen" was a direct result of adding creative talent from Pixar after Disney bought it for US$7.4 billion in 2006.

When combined with its US$4 billion acquisition of Lucasfilm in 2012 and the release of three more installments in the "Star Wars" franchise starting in December 2015, Disney CEO Bob Iger said he expects the motion-picture business to grow, fueled by international sales, bucking the industrywide decline in disc sales and a low-growth domestic theatrical market.

"The strategy of making branded movies is definitely working, and I think that we really are just seeing the beginnings of it in terms of their impact on the company," Iger said.

Net income in the three months through March jumped 27 percent to US$1.92 billion, or US$1.08 per share, from US$1.51 billion, or 83 cents per share, in the same period a year ago.

Excluding charges for foreign exchange losses and restructuring, adjusted earnings came to US$1.11 per share, beating the 96 cents expected by analysts polled by FactSet.

Revenue grew 10 percent to US$11.65 billion, trumping the US$11.25 billion analysts expected.

The biggest surprise was the strength of the movie studio, which saw revenue increase by 35 percent to US$1.8 billion and operating income quadruple to US$475 million.

"It was a good clean beat from the studio," said Brett Harriss, an analyst with Gabelli & Co. "All the other divisions were solid."

Revenue from Disney's TV business rose 4 percent to US$5.13 billion, and operating income rose 15 percent to US$2.13 billion. The company said audience ratings were down at both ESPN and ABC, but it got higher prices for commercial time. Harriss took that as a "bullish" sign for future advertising sales.

Parks and resorts revenue rose 8 percent to US$3.56 billion thanks to higher domestic attendance and higher guest spending. The company said last week that it would boost spending on its newest park in Shanghai by US$800 million to account for higher expected demand when it opens in late 2015.

Consumer products revenue grew 16 percent to US$885 million, also lifted by "Frozen," whose merchandise accounted for nine of the top 10 best-selling items in Disney Stores. Iger said "Frozen" had become one of Disney's best franchises. It is increasing the film's characters in its parks, developing a Broadway show and working on books and interactive products. He said he expects the impact of the hit to last for at least the next five years.

The interactive division eked out a small profit for its third consecutive quarter, a turnaround helped by the Disney Infinity video game.

Shares of Burbank, California-based The Walt Disney Co. rose 45 cents to US$81.48 in after-hours trading following the earnings release. Earlier, shares fell 19 cents to close the regular session at US$81.03.

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