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Disney beats analysts' estimates despite down quarter

Source: Thomson Reuters Foundation - Wed, 6 Feb 2013 12:45 AM
Author: Reuters
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* Shares rise 1.7 pct in after-hours trade

* Interactive makes small profit

* ABC sells out Oscar telecast advertising

By Ronald Grover and Sue Zeidler

LOS ANGELES, Feb 5 (Reuters) - Walt Disney Co adjusted earnings on Tuesday beat analysts' estimates despite rising costs of acquiring sports programming for its ESPN sports juggernaut.

Shares of the media giant rose 1.7 percent in after-hours trading. Before the announcement, Disney closed up 39 cents at ${esc.dollar}54.29 on the New York Stock Exchange.

The company said net income fell 6 percent to ${esc.dollar}1.38 billion from ${esc.dollar}1.46 billion for its fiscal first quarter.

However, on an adjusted basis, the company posted earnings of 79 cents a share that beat Wall Street analysts' 76 cents forecast, according to Thomson Reuters I/B/E/S.

Disney Chairman and CEO Bob Iger told analysts in a call after the earnings announcement that the company sees a stronger next few quarters based on what he said was a stronger lineup of films and growing attendance at its theme parks.

"We're very pleased with our first-quarter results, which set the stage for continued growth in 2013, following a year of record revenue, net income and earnings per share in 2012," Disney Chief Financial Officer Jay Rasulo said during the call.

Iger also disclosed that the company intends to produce films other than the iconic "Star Wars" series it acquired when it paid ${esc.dollar}4.06 billion in October to buy director George Lucas' Lucasfilm, although he did not disclose which projects other than the space adventure the studio had targeted.

Disney intends to release a new "Star Wars" film in 2015, and plans a new installment every two or three years, and has signed "Star Trek" director J.J. Abrams to direct the first one.

"We have a few scripts in mind," Iger said of films beyond the series. He also said that the company intends to leverage the "Star Wars" "brand" across other areas of Disney's business.

Operating earnings at Disney's Media Network's operation, the largest of its five units, increased by 2 percent, dragged down by reduced earnings at its cable operations due to ESPN's higher costs to carry college football, NFL and other costs, the company said.

Disney's theme park unit benefited from higher attendance at its domestic theme parks, driven by the new Cars Land attraction it opened in June, Rasulo said, although higher labor costs at its Disneyland Paris parks costs moderated earnings.

Price hikes at Disney's parks are possible, as it continues to roll out new attractions, Iger said in response to a question.

"We've got some price leverage," he said. "If you build the right things not only will people come but you get some leverage out of it as well."

Earnings fell 5 percent at Disney's studios, which it attributed to a stronger slate a year earlier powered by Cars 2, which had worldwide ticket sales of ${esc.dollar}559.8 million, according to the movie site Box Office Mojo.

The company said its interactive division swung to a profit of ${esc.dollar}9 million from a loss of ${esc.dollar}28 million in the prior quarter, although Iger and Rasulo said it would likely revert to a loss in the coming quarter because it has fewer new products to sell.

"There were no real surprises, although interactive was probably what surprised us the most on the upside," said David Bank, analyst with RBC Capital Markets.

Disney said ABC has sold out its advertising for the upcoming Academy Awards on Feb. 24.

On the call with analysts, Rasulo said it was the best selling pace for the Oscars in more than a decade and that the Oscars were virtually sold out by Christmas.

Ad Age reported that Disney has been commanding between ${esc.dollar}1.65 million and ${esc.dollar}1.85 million for a 30-second spot in this year's Oscar broadcast, citing media buyers and others familiar with the tone of the negotiations.

That's up slightly from the ${esc.dollar}1.6 million to ${esc.dollar}1.7 million ABC secured for the 2012 Oscars telecast, Ad Age said.

David Miller, analyst with B. Riley Caris, said he was surprised not to see Disney report any charges related to its Lucasfilm acquisition as of yet and expects the company may yet announce some restructuring.

"We think they're going to lay some people off," said Miller. "There's going to be a lot of restructuring, there's going to be a lot of charges. But fiscal 2014 looks pretty good," he said.

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