Disney's Studio Helps Earnings Beat Expectations but Broadcast Struggles

Blockbuster "Alice in Wonderland" helped Disney beat expectations: every single division posted higher revenue, with revenue 6 percent higher than last year at $8.58 billion. Earnings per share of 48 cents beat analyst expectations, up 12 percent from last year's adjusted numbers.


This quarter's real success story was the studio, where "Alice's" global success and pricier 3-D tickets drove studio revenue up 7 percent while operating income grew from just $13 million a year ago to $223 million this past quarter. That's not the only good news -- in the current quarter the studio will cash in on "Iron Man," having bought Marvel last year. The strong pipeline of franchise films, from "Toy Story 3" next month to a "Pirates" sequel in 2011 drew praise from CEO Bob Iger, who in past quarters had criticized the studio for failing to nail the right mix of content.

But shares traded lower after hours on lower results than expected at Disney's Media Networks. The ABC broadcast channel continues to drag on results -- operating income for the division dropped 24 percent in the quarter to $123 million, while analysts polled by Street Account expected $170 million in operating income from the division. (Note: Disney does not provide guidance). Though the cable networks reported 9 percent revenue growth, operating income grew just three percent to $1.183 billion, a hair less than analysts expected (according to Street Account).

Growth at the networks may have been less impressive than Wall Street had hoped, but Disney's outlook for the advertising market is very positive ahead of the Upfront ad sales period, which bodes well for ad sales in the current quarter. The company says rates in the scatter market (or last-minute ad purchases) are about a third higher than last year's Upfront ad sales levels. This leads Disney to expect higher Upfront ad sales for both its cable properties and its ABC network.

The parks division reported 12 percent lower operating income on two percent higher revenue. The company explained that's a result of a longer-term strategy to phase out deep discounting on parks package deals, getting consumers used to "normalized" pricing. The company says it expects to return to prior higher-margin prices by next year. The company also points out that spending by each guest was higher, though it was offset by decreased attendance.

I spoke exclusively with CEO Bob Iger about the company's quarterly results as well as industry-wide trends. Check back for blogs and clips from my interview.