The Walt Disney Company (DIS), a diversified entertainment company, recently posted better-than-expected second-quarter 2010 results, but the results at its Media Networks division disappointed and the stock fell 3.6% or $1.27 to $34.49 in after-market trading on Tuesday.
The quarterly earnings of 48 cents a share comfortably surpassed the Zacks Consensus Estimate of 45 cents and jumped 12% from 43 cents delivered in the prior-year quarter.
Total revenue for the quarter rose 6% year-over-year to $8,580 million, whereas total operating income surged 15% to $1,757 million. Its Studio Entertainment division was the major driving factor for the increase in operating income, helped by strong theatrical releases, most notably Alice in Wonderland.
Segment Breakdown
Media Networks revenue rose 6% to $3,844 million, driven by revenue increase across Cable Networks (up 9%) and Broadcasting (up 1%). However, total operating income remained flat at $1,306 million.
Cable Networks’ operating income grew 3% benefiting from the increase in affiliate and advertising revenue at ESPN, offset by a rise in programming costs. Operating income at Broadcasting tumbled 24% due to the decline in primetime and news advertising revenue at ABC Television Network and increase in programming costs.
Parks and Resorts revenue climbed 2% to $2,449 million, whereas operating income dropped 12% to $150 million due to higher fuel costs and promotions at Disney Cruise Line.
Studio Entertainment revenue jumped 7% to $1,536 million, but posted a substantial increase in operating income to $223 million compared to $13 million in the prior-year quarter, driven by the increase in worldwide theatrical distribution and lower marketing and distribution costs.
Consumer Products revenue soared 20% to $596 million, whereas operating income surged 37% to $133 million, reflecting an increase at Merchandise Licensing, growth at Publishing driven by Marvel titles, and a rise in comparable-store sales at the Disney Stores, North America.
Interactive Media revenue for the quarter jumped 20% to $155 million, and posted an operating loss of $55 million, an improvement of 10% over the prior-year quarter, reflecting the rise in subscription revenue at Club Penguin and lower inventory of video games, partly offset by increased sales and marketing costs, and Internet product development expenses.
Financial Aspects
During the quarter, Disney generated free cash flow of $1,074 million. The company ended the second quarter with cash and cash equivalents of $3,075 million, total borrowings of $13,241 million and shareholders’ equity of $37,480 million, excluding a non-controlling interest of $1,489 million.
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