Disney Beats Ests, Rev Up - Analyst Blog

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The Walt Disney Company ( DIS ) posted first-quarter fiscal 2013 earnings of 79 cents a share that surpassed the Zacks Consensus Estimate by a couple of cents but inched down 1.3% from the comparable year-ago quarter. Including one-time items, earnings came in at 77 cents a share.

Revenue gains at the Parks and Resorts business and strong performance of the Media Networks division continue to boost the company's profits.

Total revenue of this Zacks Rank #3 (Hold) company increased 5% year over year to $11,341 million and exceeded the Zacks Consensus Estimate of $11,237 million. However, total segment operating income decreased 3% year over year to $2,380 million.

Segment Details

Media Networks revenues elevated 7% year over year to $5,101 million, reflecting an increase of 7% in Cable Networks to $3,538 million coupled with a 6% rise in Broadcasting revenues to $1,563 million. The segment's operating income marked an increase of 2% to $1,214 million boosted by a 16% jump in Broadcasting operating income to $262 million, which reflected higher advertising revenues at ABC Television Network and at owned television stations coupled with increased program sales. However, operating income at the Cable Networks division declined 2% to $952 million, signifying increased programming and production costs at ESPN.

Management stated that so far in the second quarter of fiscal 2013, ESPN's ad sales are pacing up 7%. Going forward, management remains confident of a strong performance by ESPN as it remains the favorite destination of sports lovers and has the right mix of exclusive sporting licenses with top sporting leagues. Moreover, new affiliate deals are expected to boost revenues.

The company entered into a number of content distribution deals with companies like Comcast Corp ( CMCSA ), Netflix Inc. ( NFLX ), Charter Communications Inc . ( CHTR ) and Cox Communications.

We believe these deals will fortify Disney's multichannel subscription model by adding more platforms to deliver its content any time and on any device. The company's focus on providing out-of-home access to its popular programs will help it gain new subscribers. Moreover, such moves not only strengthen Disney's position but create long-term revenue generating opportunities.

Parks and Resorts revenues rose 7% to $3,391 million, while the segment's operating income rose 4% to $577 million, reflecting higher revenues from domestic parks and resorts.

Disney remains focused on deploying its capital toward expanding its Parks and Resorts business, and in turn, enhancing its markets and creating long-term growth opportunities. Management stated that so far in the second quarter of fiscal 2013, domestic resort reservations are up 4% and booking rates are up in the high-single-digits.

Studio Entertainment revenues declined 5% to $1,545 million, while operating income plunged 43% to $234 million compared with $413 million in the year-ago quarter, reflecting decline in home entertainment and theatrical distribution.

Consumer Products revenues increased 7% to $1013 million, while segment operating income rose 11% to $346 million, reflecting gains at Merchandise Licensing along with retail business.

Interactive Media revenues for the quarter increased 4% to $291 million, while operating income marked a significant improvement and came in at $9 million compared with a loss of $28 million, reflecting revenue gains at Japan mobile business.

Other Financial Details

During the quarter, Disney generated free cash flow of $599 million. The company ended the quarter with cash and cash equivalents of $3,207 million, net borrowings of $14,241 million up $3,317 million from the previous quarter, and shareholders' equity of $41,016 million, excluding non-controlling interest of $2,354 million.

Strong results poise the company well to enhance shareholders value through share repurchases. During the reported quarter, it bought back 21 million shares for approximately $1 billion. Fiscal year-to-date, the company bought back 27.1 million shares worth $1.4 billion.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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