Disney tops earnings forecasts with streaming gains, raises guidance

[LOS ANGELES] Walt Disney posted better-than-expected quarterly results and raised its annual profit forecast on Wednesday (Aug 6), led by gains in streaming business, which is expected to be the centrepiece of its growth strategy in coming years.

In the last 24 hours, the media and entertainment company entered two major deals with the National Football League (NFL) and WWE as it readies its US$29.99-per-month ESPN streaming service that will give viewers access to sporting events, including the NFL and National Basketball Association.

Adjusted earnings per share rose 16 per cent from a year ago to US$1.61 for Disney’s fiscal third quarter. Analysts had expected US$1.47, according to the LSEG data.

The WWE deal will bring exclusive rights to major wrestling events, including WrestleMania and Royal Rumble to the streaming service, set to launch Aug 21.

CEO Bob Iger said the launch of the ESPN app and the NFL deal, along with a coming integration of Hulu into Disney+, would create “a truly differentiated streaming proposition”.

The NFL will take a 10 per cent equity stake in Disney’s ESPN sports network. The deal values were not disclosed.

The company has been building its streaming business in sports and entertainment as traditional TV viewing declines. It is also expanding its popular theme parks and cruise lines.

For the full year ending in September, the company projected adjusted EPS of US$5.85, a 10-cent rise from prior forecasts.

“With ambitious plans ahead for all our businesses, we’re not done building, and we are excited for Disney’s future,” Iger said.

The company projected it would add 10 million Disney+ and Hulu subscribers in the current quarter, most of them from an expanded partnership with cable operator Charter.

In the just-ended quarter, Disney+ and Hulu subscriptions increased by 2.6 million to 183 million, powering a 6 per cent increase in revenue at the direct-to-consumer business. The unit posted an operating income of US$346 million, compared with a loss of US$19 million a year ago.

Operating income in the entertainment division fell 15 per cent to US$1 billion. Disney attributed the drop to lower results from traditional television networks and the strong performance of the film Inside Out 2 a year earlier.

Disney’s parks division reported a 13 per cent gain in operating income to US$2.5 billion. Profit at domestic parks rose 22 per cent even with new competition in Orlando, Florida, from Universal’s Epic Universe, which opened in late May, as visitors increased their spending.

Walt Disney World in Orlando posted record revenue for the quarter, Disney chief financial officer Hugh Johnston said.

At the sports unit, operating income rose 29 per cent to US$1 billion. Domestic ESPN profit fell 3 per cent, partly from higher programming and production costs, including rate increases for NBA games and college sports. REUTERS