Disney (DIS – Free Report) reported fourth-quarter fiscal 2018 adjusted earnings of $1.48 per share that comfortably beat the Zacks Consensus Estimate of $1.31 per share. The figure increased 38% from the year-ago quarter.
Revenues increased 12% from the year-ago quarter to $14.31 billion. The figure also surpassed the consensus mark of $13.81 billion. Strong performance of Studio Entertainment and Parks and Resorts primarily led to top- and bottom-line growth.
Media Networks Up on Higher Affiliate Revenues
Media Networks’ (41.7% of revenues) revenues climbed 9.1% year over year to $5.96 billion. Revenues from Cable Networks increased 5% to $4.13 billion. Broadcasting revenues increased 21% year over year to $1.83 billion.
Media Networks’ affiliate revenues increased 5%, driven by higher rates (7 points), partially offset by a decrease in subscribers (1 point) and foreign currency fluctuations (1 point).
Media Networks’ operating income increased 4% year over year to $1.53 billion. Cable Networks’ operating income decreased 6% to $1.2 billion, while broadcasting operating income surged 66% to $379 million.
Cable Networks’ operating income was hurt by BAMTech loss, partially offset by increases at Freeform and Disney channels.
BAMTech loss reflects ongoing investments in technology along with higher content and marketing costs.
Lower programming costs, increased affiliate revenues and lower marketing costs led to increase in Freeform operating income. This was partially offset by lower advertising revenues due to decrease in average viewership and fewer units delivered.
Higher operating income at Disney channels was due to increase in income from program sales, lower programming costs and reduced marketing costs.
ESPN’s results were flat year over year as strong affiliate revenues were partially offset by higher programing and production costs and a decline in advertising revenues (6%).
ESPN+ launched in early April recently surpassed one million paying subscribers primarily due to a strong content lineup and targeted demographic advantage.
Growth in affiliate revenues reflected contractual rate increases, partially offset by a decline in subscribers. Moreover, lower advertising revenues were due to a decrease in impressions from lower average viewership.
The increase in broadcasting operating income was due to higher program sales and affiliate revenue growth. The increase in program sales was driven by higher sales of two Marvel series and Black-ish in the reported quarter as against sale of one Marvel series in the prior-year quarter.
Affiliate revenue growth was due to contractual rate increases. However, network advertising revenues remained flat year over year due to lower average viewership, partially offset by higher rates and increased political advertising spend.
Equity in the income of investees decreased $20 million from the year-ago quarter to a loss of $10 million due to higher losses incurred from Hulu and lower income from A+E Television Networks (A+E).
Hulu’s losses were primarily attributed to continuous investments in programing, increased marketing spend and higher labor costs, partially offset by increase in advertising and subscription revenues. A+E revenues were hurt by lower advertising revenues and higher programing costs, partially offset by higher program sales.
The Walt Disney Company Price, Consensus and EPS Surprise