Walt Disney's Lower Earnings Enough to Beat Forecasts

Walt Disney posted sharply lower quarterly earnings, but beat Wall Street forecasts on strong showings at its ESPN sports network and Disney Channel and lower-than-expected charges, boosting its shares 4 percent.

The media networks arm of the No. 1 U.S. entertainment conglomerate bucked expectations for the quarter with a 2 percent rise in revenue and a tiny 4 percent decrease in operating profit, despite a global advertising downturn.

Disney , shares of which finished the regular NYSE session Tuesday up 1.27 percent at $23.15, were up about 4 percent in extended trading.

Higher affiliate revenue at ESPN and the kid-friendly Disney Channel helped offset the weak ad trend, the company said.

But analysts warned of a still poorly performing theme parks division ravaged by a global slump in travel. Others said the ad market—crucial for Disney, whose media arm accounts for nearly half its turnover—remained in turmoil amid the recession.

Reinhold Matay / AP

"They beat on low expectations. I think that is what we are seeing in media and consumer discretionary companies,'' Edward Jones analyst Robin Diedrich said. "Overall, the numbers are not good in advertising and the parks, and that's where we thought the weakness would be.''

Operating income at the ABC broadcast network dropped 38 percent on lower ad sales at Disney owned-and-operated TV stations and higher programing costs. Profit at Disney's movie studio fell sharply as well.

Net income fell to $613 million, or 33 cents per share, from $1.13 billion, or 58 cents per share, a year earlier. But excluding restructuring and impairment charges of 10 cents per share, Disney's profit came to 43 cents per share.

Revenue slid 8 percent to $8.09 billion, partly the result of aggressive discounting at domestic theme parks.

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Analysts, on average, had expected earnings, excluding items, of 40 cents per share on revenue of $8.14 billion, according to Reuters Estimates.

Severance and related costs accounted for most of the restructuring charges as the media and tourism giant trims its workforce.

Disney booked a raft of non-cash charges, the largest being $108 million linked to radio Federal Communications Commission licenses and $46 million related to investment in an Indian media company.

''The stock is indicated up, likely on a relief rally that they didn't miss so materially once again. A lot of analysts thought they'd miss a third time,'' said David Miller with Caris & Co. ''From a restructuring charge perspective, they actually beat consensus.''

- CNBC.com staff to this report.

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