Disney's Earnings Disappoint Though Advertising Rises


Disney's fiscal second quarter earnings fell short of Wall Street expectations, on a slew of issues: some controllable; like a movie that bombed, and some uncontrollable; like, the Japanese earthquake.

Disney doesn't provide any guidance to the Street, and usually Wall Street underestimates Disney's numbers.

This time they didn't fully account for a number of one-time hits to the top and bottom lines. I sat down with CEO Bob Iger in an exclusive interview about Disney's results.

The company grew revenue and earnings, though less that expected. Revenue grew six percent to $9.077 billion and earnings per share grew 2 percent to 49 cents. Wall Street was looking for $9.12 billion in revenue and 57 cents in EPS. Get after-hour quotes for Walt Disney here.

What accounts for the shortfall?

The studio's revenue fell 13 percent and operating income dropped 65 percent. At fault: "Mars Needs Moms," which bombed, and tough comps to last year in both DVD and theatrical releases. The parks had the disadvantage of the calendar — the quarter was a weekend shorter and didn't include Easter, a big travel weekend. And the Japanese earthquake had a bigger-than expected impact, about $25 million, on Disney's Japanese park as well as consumer products. There's another issue, which Disney warned about in the prior year's earnings call: the purchase accounting impact of Playdom, which it bought last August.

But Disney, like its rival media companies, reported real strength in advertising.

And CEO Bob Iger is optimistic going into the Upfront ad sales period that this kind of growth will continue.

In this past quarter broadcasting reported a whopping 36 percent in operating income on 4 percent higher revenue.

The cable networks, which also benefited from higher affiliate fees, saw a 17 percent increase in revenue and 15 percent higher operating income.

And the trends at the park are positive — despite the elimination of discounts and return to regular prices, people are still arriving in droves and booking cruises. Iger says they're not even seeing negative impact from higher gas prices.

On the earnings call we can expect plenty of questions about the park and advertising. Iger won't give specific guidance, but we can expect plenty of needling for any hint of what the fiscal third quarter holds.

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