Walt Disney Co (NYSE: DIS) last Thursday announced fourth-quarter earnings in all its businesses. According to the earnings statement, the firm reported disappointing earnings that missed analysts’ expectations. The shocking earnings miss was caused by the loss of ESPN subscribers, which resulted in weakness in its film studios. The effect of hurricane Irma that hit Florida where the Company’s theme park is located also had a negative effect on the top and bottom lines.
The poor earnings report shocked investors and the company’s shares drop 3% to $99.59 in after-hour trading. Walt Disney reported earnings and revenue of $1.07 per share and $12.8 billion respectively, which missed analysts’ prediction of $1.12 per share and 3% lower than earnings from the previous year.
A Tough Quarter for Walt Disney
Walt Disney announced a lower than expected report for the fourth quarter that ended in September. The firm missed Wall Street analysts’ expectation in all business segments including consumer product description, park, and resort, movie studio, and media network unit. This disappointing report exerts a downward pressure on Disney’s shares sending it down 3%. More so, out of Walt Disney’s four operating segments, only the park, and resort segment posted an improving operating income and revenue.
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According to the report, the revenue for the media segment that includes the company’s sports channel was down 3% to $5.4 billion. Although the revenue was similar to previous year’s report, the firm recorded a decline in the number of subscribers and advertising revenue even as affiliate revenue rose.
The movie studio, which is the largest segment record a great loss as its revenue drop 21% to $3.95 billion, which is below analyst expectation of $4.06 billion. However, analyst believed that hurricane Irma that struck Florida in September caused Walt Disney to shut down it world resort for two days. However, this influenced Walt Disney’s fourth-quarter earnings as it cost the entertainment firm around $275 million, which is equivalent to 11 cents per share.
Separately, the firm recorded a 6% increase of $4.7 billion in revenue and a 7% increase in its operating income for the park and resort business. According to the report, Disney’s total revenue for the fourth quarter fell to $12.78 billion lower than the $13.14 billion from the previous year and misses the $13.15 billion predicted by analysts.
Walt Disney Ready to Compete with Rivals
Although the firm has profited greatly from its TV channels, as consumers dump cable subscription for online replacement, the firm’s growth is challenged. For this reason, Walt Disney announced in August it’s preparing to launch its own direct-to-customer streaming service in 2019 to compete with other rivals. More so, the California-based firm plans to end the distribution agreement with Netflix for subscription services in 2019. In a conference call held with the analyst on Thursday, Walt Disney’s CEO, Robert Iger told analyst that the firm is ready to compete with rivals.
According to the statement released by Disney’s CEO, Robert Iger, “We look forward to launching our first direct-to-consumer streaming service in the New Year, and we will continue to invest for the future and take the smart risks required to deliver shareholder value.”
Although analysts were skeptical about Walt Disney’s cable business, however, they still believe that “Star Wars” that is scheduled to debut in December can still cough up $2 billion in global office sale for the firm. According to Ivan Feinseth, an analyst at Tigress Financial Partners, “…The last Jedi,” hitting theaters in December could ring up $2 billion in global box office sale.”