Shares of Disney (DIS - Free Report) dipped through early afternoon trading on Wednesday as investors assess the future of ESPN and the company’s highly important Media Networks division. Meanwhile, Disney’s Studio Entertainment unit, driven by its Marvel and Star Wars franchises, continues to impress and there are no signs it will let up anytime soon.
Disney’s adjusted Q2 earnings climbed 23% from the year-ago period to $1.84 per share, which topped our Zacks Consensus Estimate. The company’s overall quarterly revenues also popped 9% to $14.55 billion. However, operating income from Disney’s Media Networks unit dipped as ESPN’s cost rose (also read: Disney Investors Should Focus on Streaming Future, Not ESPN's Climbing Costs).
On the bright side, Disney’s Studio Entertainment revenues soared 21% to hit $2.45 billion, which did fall short of our exclusive non-financial metrics consensus estimate of 2.85 billion. With that said, the unit’s operating income also surged 29% to reach $847 million, which marked a larger year-over-year climb than Disney’s hugely successful Parks and Resorts unit. Furthermore, Disney noted that Studio Entertainment’s operating income set a new second quarter record.
Disney pointed directly to the massive box office success of Black Panther, which has pulled in more than $1.3 billion so far. Black Panther’s success helped boost Studio Entertainment revenue even more since there was not a comparable Marvel movie released in the prior-year period.
The second quarter could have been even stronger had Disney’s A Wrinkle in Time performed well. The film starring Oprah Winfrey and Reese Witherspoon looked even worse compared to Beauty and the Beast’s stellar performance in the year-ago period.
Moving on, Studio Entertainment’s home entertainment division climbed due to higher average net effective pricing and an increase in overall unit sales, which was driven by the success of Star Wars: The Last Jedi. Disney also saw gains from its TV and streaming or subscription video on demand segment, lifted by the release of Star Wars: The Force Awakens.
The company’s Studio Entrainment umbrella of Disney, Marvel, Lucasfilm, and Pixar is set to keep on churning out blockbuster titles over the next few years. This will become even more valuable down the line as Disney dives into its on-demand streaming video service future.
Disney CEO Bob Iger boasted about the company’s “impressive” slate of upcoming studio releases over the next 18 months. New offerings include Solo: A Star Wars Story, Incredibles 2, Mary Poppins Returns, Captain Marvel, Dumbo, Avengers 4, Aladdin, Toy Story 4, The Lion King, Frozen 2, and Star Wars: Episode IX.
All of these upcoming films will likely one day appear on Disney’s new direct-to-consumer streaming service, which is set to launch in late 2019. Investors should be excited about Disney’s streaming platform as the company aims to compete directly against Amazon (AMZN - Free Report) and Netflix (NFLX - Free Report) .
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