Walt Disney Q3 results miss estimates despite box office success; stock falls

Revenues of entertainment powerhouse Walt Disney Company (NYSE: DIS) increased in double digits during the third quarter of 2019, with contributions from all the business segments. However, adjusted earnings declined 28% and missed Wall Street’s prediction. The company’s stock fell sharply during Tuesday’s after-hours trading session following the announcement.

Adjusted earnings from continuing operations, excluding special items, decreased by 28% to $1.35 per share from $1.87 per share in the third quarter of 2018. On an unadjusted basis, net profit from continuing operations was $1.44 billion or $0.79 per share, down from $2.92 billion or $1.95 per share last year. Earnings also missed the Street view. The bottom line was negatively impacted by a 55% increase in costs and expenses.

At $20.25 billion, net revenues were higher by 33% compared to year-ago quarter. Analysts were looking for faster top-line growth. Disney recorded charges of about $207 million during the quarter, primarily for severance in connection with the integration of 21CF.

Media Networks revenues rose 21% during the June quarter from the year-ago period. Parks, Experiences & Products recorded a 7% increase, while Studio Entertainment revenues rose by 33%. There was a sharp increase in Direct-to-Consumer & International revenues.

Related: Walt Disney Q2 2019 Earnings Conference Call Transcript

“The incredible popularity of Disney’s brands and franchises positions us well as we launch Disney+, and the addition of original and library content from Fox will only further strengthen our direct-to-consumer offerings,” said Robert Iger, chairman and chief executive officer of The Walt Disney Company.

Disney is currently riding on the success of Avengers: Endgame, the blockbuster movie from Marvel that was released in April. Subsequent releases like Aladdin and the latest Toy Story franchise boosted the global box office revenue. It gave the much-needed push to the Studio Entertainment segment, which had a weak start to the year.

Related: Netflix stock plunges on big miss in subscriber additions

A few months ago, the company announced Disney Plus, marking its entry into the video streaming space. The initiative came after Disney spiked its stake in Netflix (NFLX) and Hulu, and gained access to the titles of Fox (FOXA) through a merger deal.

Last month, Disney’s shares climbed to an all-time high, after gaining steadily since the beginning of the year. In the past twelve months, the stock advanced 26%, outperforming the market.

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