The Walt Disney Company reported underwhelming fourth quarter earnings on Thursday, as the company deals with the headwinds affecting cable colossus ESPN and the lack of studio releases for the quarter.
After the bell, the entertainment giant posted revenue of $12.78 billion and earnings of $1.07 cents a share for the three months ended Sept. 30, failing to meet Wall Street estimates. On average, analysts anticipated Disney would report $13.27 billion in sales and earnings of $1.14 cents a share.
Shares of Disney stock dipped three percent in after-hours trading to about $99 a share.
CEO Bob Iger boasted the company’s upcoming streaming service in his statement accompanying earnings.
“No other entertainment company is better equipped to navigate the ever-evolving media landscape, thanks to our unparalleled collection of brands and franchises and our ability to leverage IP across our entire company,” said 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.”
Disney’s revenue decreased three percent year-over-year, as its studio and cable networks were down. Disney pulled in $218 million in revenue from its studio during Q4 — compared to the $381 million it made during the same period last year.
Disney didn’t release any films during the quarter, explaining the quiet performance of its studio, which set a global box office record last year. But the next three months should be stacked with big screen hits, including “Star Wars: The Last Jedi” in December. And the success of “Thor: Ragnarok,” which has already passed $500 million at the box office after its release last week, will also show up on the balance sheet.
Disney made waves earlier in the week when it emerged the Mouse House had been looking at buying Fox’s TV and movie businesses. The deal would bring top franchises like “X-Men” into the Disney fold and bolster the studio’s arsenal as it prepares to launch its own streaming service in 2019. The added content would come in handy as Disney prepares to fight mainstays like Netflix, while also doubling its stake in Hulu to 60 percent.
The company is also preparing to debut an over-the-top ESPN service next year to counteract the waning strength of its sports cash cow. ESPN peaked at 100.1 million subscribers in 2011, but cord-cutting has eroded its once-teflon standing, as the cable network has dropped more than 12 million subscribers since its heyday. At an estimated $7 per subscriber each month, that’s a lot of scratch. Cable revenues of $3.95 billion were flat year-over-year for Disney, but Sports Illustrated reported on Thursday another 100 ESPN staffers would be let go after Thanksgiving.
One bright spot for Disney during Q4 was its theme parks, which saw revenues increase six percent to $4.7 billion.
Heading into Thursday, Disney shares had been in a bit of a holding pattern for the last three months, hovering between $97 and $103 a share.
Disney will discuss the earnings on a conference call at 4:30 p.m. ET.