Walt Disney Co: This Is Sending DIS Stock Soaring Today

Disney StockMedia and entertainment giant Walt Disney Co (NYSE:DIS) posted lower-than-expected fourth-quarter earnings impacted by disappointing cable revenue.

In Q4, Walt Disney Co’s cable networks business reported a $207.0 million decline in operating income to $1.4 billion, led by ESPN, which “reflected lower advertising and affiliate revenue and higher programming and production costs.”

In the fourth quarter, Disney stock reported an eight percent decline in its earnings per share (EPS) to $1.10, below the consensus estimate of $1.16. Revenue slumped three percent to $13.14 billion, lower than the $13.52-billion revenue estimates, which included an extra week of operations.

The DIS stock price, following its earnings release, was down 2.67% to $92.42 in after-hours trading. In a choppy trade, Disney stock initially dropped in an immediate reaction, but later reversed and gained three percent after conference call.

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The main highlights of the company during fiscal 2016 included the opening of the Shanghai Disney Resort, the phenomenal return of the Star Wars movie franchise, and Disney Studio’s record-breaking $7.5 billion in total box office collections. The success of Star Wars: The Force Awakens released in Q1 2016 aided the company in fiscal 2016.

Robert Iger, the chairman and chief executive officer of Walt Disney Co, said, “We’re very pleased with our performance for the year, delivering the highest revenue, net income and earnings per share in Disney’s history.”

Disney Stock Q4 Highlights

Disney has five business lines spanning across “Media Networks,” “Parks and Resorts,” “Studio Entertainment,” “Cable Networks,” and “Consumer Products & Interactive Media.”

Media Networks, Walt Disney Co’s biggest source of sales, reported a three percent fall in fourth-quarter revenue to $5.66 billion on account of higher programming and production costs.

Parks and Resorts Q4 revenue increased one percent to $4.39 billion, lower than analysts’ estimates of $4.57 billion. The operating income of the segment plunged five percent to $699.0 million as a result of a decline in its international operations.

Disney’s international operations were affected due to lower results at Disneyland Paris and Hong Kong Disneyland Resort. Management cited terrorism and a weaker economy for disappointing results at Disneyland Paris. Walt Disney Co expects its new Shanghai Disney Resort to roughly break even in fiscal 2017.

The company posted growth at its Studio Entertainment segment in Q4 as sales increased two percent to $1.81 billion, driven by the performance of films Finding Dory and Captain America: Civil War.

Affiliate revenue growth in Q4 was driven by higher contractual rates. The company reported an increase in TV program sales income led by sales of Luke Cage, Quantico, and Golden Girls, while the company reported lower sales of Scandal and Nashville.

Walt Disney Co’s operating income in its Consumer Products & Interactive Media segment witnessed growth due to higher merchandise licensing revenue, aided by Star Wars merchandise, partially offset by lower sales of merchandise based on Frozen.

What’s Next for Walt Disney Co?

In its attempt to scale its digital distribution network, Walt Disney Co had reportedly bid for Twitter Inc (NYSE:TWTR), along with technology companies such as Alphabet Inc (NASDAQ:GOOG) and Salesforce.com, Inc. (NYSE:CRM), but only to retrace it later from the struggling social network company.

The main factors to watch out for  regarding Walt Disney Co include the company’s plan to acquire a 33% stake in BAMTech, the guidance of modest EPS growth in fiscal 2017, followed by strong gains in 2018.