Blame It on ‘Mars’: Disney Earnings Up, But Miss Mark

Profits increase marginally; ‘Mars Needs Moms’ flopped while Tokyo earthquake and tsunami hurt parks and resorts

Disney reported its earnings for its fiscal second quarter on Tuesday, and the results, impacted by the costly box office bomb "Mars Needs Moms" and the earthquake in Japan, were not what Wall Street had hoped for.

Earnings per share or the second quarter increased 2 percent to $0.49, compared to $0.48 in the prior-year quarter.

Analysts were expecting earnings per share of 57 cents, an 18 percent increase, according to Thomson.

Overall, Disney's revenues rose 6 percent to $9.077 billion during the quarter. That was more in line with what analysts were expecting, or $9.127 billion. Disney's net income fell 1 percent to $942 million.

Revenues at Disney's media networks — which include ABC, ESPN and the Disney Channel — increased 12 percent (to $4.3 billion) and operating income rose 17 percent (to $1.5 billion) driven by higher advertising revenue at ABC and ESPN and the addition of college football's Bowl Championship Series games.

Disney warned investors that while it expects ESPN's growth will continue, the network faces a tough comparison for the rest of the year, since the network benefitted from a seven-game Lakers-Celtics NBA final and the World Cup in 2010.

Higher advertising revenues at ABC were driven by increases in primetime and news, and  partially offset by the move the BCS National Championship game to ESPN, Disney said. Higher sales of ABC Studios productions — driven by "Criminal Minds," "Army Wives" and "Castle" — were partially offset by the absence of "Lost."

Disney's studio revenues decreased 13 percent (to $1.3 billion) and operating income dropped 65 percent (to $77 million) by not having any "Toy Story" DVDs to sell this quarter, as well as the exceptionally poor performance of "Mars Needs Moms," particularly in comparison to last year's worldwide release of "Alice in Wonderland." ("Mars Needs Moms" reduced earnings results by more than $70 million, Disney said.)

Disney chief Bob Iger said Disney's summer slate — last week's "Thor" and the upcoming releases of "Pirates of Caribbean 4" and Disney-Pixar's "Cars 2" — should drive revenues for the rest of the year. (During a conference call with investors on Tuesday, Iger called the films "key swing factors.")

Revenues from Disney's consumer products increased 7 percent on "Tangled" and "Toy Story" merchandise.

Disney's Parks and Resorts business saw its operating income decrease 3 percent (to $145 million) as the earthquake and tsunami in Japan led affected the Tokyo Disney Resort and results at Disney's cruise line. They were also impacted by Easter falling later this year.

Iger urged investors to look at the company's momentum.

“We are pleased with the underlying quality of our second quarter earnings,” Iger said. “There is great creative momentum throughout the company which gives us continued confidence in our ability to grow our businesses.”

Click here for the full earnings release.