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Disney (DIS) Stock Drops by 5% as Earnings and Sales Miss Wall Street Expectations

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by Teuta Franjkovic · 3 min read
Disney (DIS) Stock Drops by 5% as Earnings and Sales Miss Wall Street Expectations
Walt Disney Concert Hall. Photo: Pixabay

Disney missed Wall Street expectations in its Q3 earnings report. DIS stock fell 3.7% in after-hours trading. Disney blamed the earnings miss on the ongoing integration of Fox’s entertainment assets, which it acquired in a $71B deal closed in March.

The latest profits from Disney haven’t really impress Wall Street, in spite of the fact that this blockbuster movie giant produced hits as are Avengers: Endgame, Captain Marvel and Toy Story 4. Not to mention that Avengers became the biggest grossing movie ever, beating Avatar.

Disney’s (DIS) shares fell 5% after the company announced numbers that failed to fulfill both investors’ expectations and analysts’ predictions. Shares declined to $141.95, up nearly 3% for the day. Disney (DIS) stock has risen nearly 31% in 2019 to date as the company has delivered strong results. At the time of writing the shares were also confirmed rising by 2.58% to $141.87.

Earnings per share came in at $1.35, which was below the $1.74 expected by the Wall Street. Total revenue of $20.2 billion undershot the consensus estimate for $21.4 billion.

Profits at the entertainment behemoth fell 51% to $1.4bn in the last three months, despite revenues have been rising 33% to $20.2bn.

However, profits from a string of movie hits, including Aladdin, failed to offset other costs at the company.

Disney chairman and chief executive Robert Iger said the third-quarter results reflect their efforts to effectively integrate the 21st Century Fox. He said:

“I’ve been doing earnings calls for a long time, and this is one of our more complicated ones.”

He called the integration of Fox “a complex endeavor,” and said that both the Fox film and TV studio were underperforming being “well below where it had been and well below where we hoped it would be when we made the acquisition.”

However, Iger claimed he has “a bullish view of the future” despite a mundane quarter, but that there will be a couple of years before Disney turns around the fortunes of Fox live-action content. The company said it took a cost impairment on Dark Phoenix, a Fox film that made $252 million at the worldwide box office.

Also, let’s not forget that the company is preparing for a new digital streaming service, Disney+ in order to compete with Netflix. As per announcements, Disney+ should be launched in November this year, but costs to build online services, as said from the company, will impact profits during the next few years. From the company, they said that they expect direct-to-consumer losses to rise to $900 million in the fiscal fourth quarter, as they continue to invest in content for Disney+.

Disney’s direct-to-consumer and international unit reported an operating loss of $553m, that is more than double from $168m a year earlier. Again, reasons are several: consolidation of Hulu and spending on Disney+ and the ESPN streaming service.

Just for reminder, in March this year, Disney completed its $71 billion acquisition of 21st Century Fox Inc.’s entertainments assets. With this deal, Disney took over a portfolio that includes the 104-year-old 20th Century Fox studio, the FX and National Geographic, and 30 percent of Hulu, the online video service. Also, given this acquisition worth $71.3 billion, the House of Mouse has one less big Hollywood competitor to fight against.

At the theme parks unit, overall operating income rose 4% to $1.7bn but Disney’s US parks’ income is falling. The reason for that may be seen in the fact that the company attributed the drop to expenses for an ambitious Star Wars-themed expansion in late May at California’s Disneyland and lower attendance.

Media networks, which includes ESPN, the Disney Channels and FX, reported a 7% increase in operating income to $2.1bn.

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Teuta Franjkovic

Experienced creative professional focusing on financial and political analysis, editing daily newspapers and news sites, economical and political journalism, consulting, PR and Marketing. Teuta’s passion is to create new opportunities and bring people together.

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