The Walt Disney Company (DIS) Earnings: Is the Glass Half Full, or Half Empty?
It came as no real surprise that Star Wars: The Force Awakens bolstered earnings for The Walt Disney Company (DIS) last quarter. What was surprising to investors this week was how little the iconic entertainment company could do to stop the bleeding of its sports channel ESPN. The continued deterioration in the number of ESPN subscribers tainted what ended up being record-breaking results.
Last quarter Disney earned $1.63 per share on revenue of $15.2 billion. The pros were only looking for a profit of $1.42 per share and a top line of $14.76 billion. Revenue also grew 14% on a year-over-year basis, while per share profits were up 28%.
Yes, the new Star Wars flick was the core of the reason for the big beat in the big improvement. It just wasn't enough to convince investors to ignore the weakness in the company's television unit. It's a problem, as in its so-called Media Networks division is still the biggest source of revenue and earnings. Last quarter, its television efforts accounted for 42% of the company's total revenue, and 33% of its total profits. If ESPN is waning - and it is - that's a bigger deal than a smash hit movie.
The specifics: revenue for the company's broadcast unit was actually up 7% due to rising advertising prices and affiliate growth. But, operating income fell 9%... mostly thanks to rising costs at the ESPN (despite deliberate efforts to cull those costs). Even so, it must be noted that at least the pace of subscriber losses for ESPN is slowing, almost to a crawl now. Whether or not that's explicitly because of something The Walt Disney Company remains to be seen. It does appear, however, that better relationships with Dish Network and Sling TV in particular are starting to bear fruit.
The mixed message presents a conundrum for traders. That said, the drop in the value of DIS shares suggests traders see the glass as half empty for the time being. On the flipside, today's intraday rebound off of new multi-month lows also suggests the last of the would-be Sellers has been flushed out and the bulls are staging a recovery effort. Wednesday's hammer-shaped bar also suggests this.
DIS Daily Chart
