Disney beats on earnings but projects big 'Lone Ranger' loss

Johnny Depp as Tonto in Disney's Lone Ranger
Source: Disney
Johnny Depp as Tonto in Disney's Lone Ranger

Disney reported earnings that beat Wall Street forecasts on Tuesday amid strength at ESPN and its domestic theme parks but a poor performance at its movie business weighed on revenue.

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The company's studio business posted a 2-percent decline in revenue in the quarter and a 36 percent-decline in operating income due to the pre-theatrical release marketing costs for "The Lone Ranger."

Disney also expects to take a loss of between $160 million and $190 million for "The Lone Ranger" in the fiscal fourth quarter. While large, that's still lower than the $200 million writedown Disney took on "John Carter" last year.

During the third quarter, the performance of "Iron Man 3" also wasn't as strong as "The Avengers" last year.

Disney's media networks fared better, with revenue rising 5 percent due to growth at ESPN. Operating income at the networks rose 8 percent in the quarter. Higher operating income at ESPN was due to increased affiliate revenues and, to a lesser extent, higher advertising revenues.

Barton Crockett, an analyst at Lazard Capital Markets, told CNBC the cable networks appear to be the highlight of the quarter.

"We're arguing that the stock could be up 15 percent or so over the next year, really powered by the cable networks," he said.

Revenue at the theme parks business rose 7 percent as Disney saw increased attendance and higher ticket prices and food and beverage spending at its domestic theme parks.

"Disney is in a great margin expansion cycle for their theme parks," Crockett said. "They've made some great investments in California and in Florida."

Overall, the media giant's net income rose 1 percent to $1.85 billion in the fiscal third quarter from $1.83 billion a year earlier.

Earnings excluding items were $1.03 per share up from $1.01 per share a year earlier and beating analyst forecasts for $1.01 a share.

Revenue rose 4 percent to $11.58 billion from $11.09 billion. But results came in below Street forecasts for $11.64 billion, according to estimates from Thomson Reuters.