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Disney Beats Earnings Estimate

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The Walt Disney Company (DIS) posted second-quarter fiscal 2013 earnings of 79 cents a share that surpassed the Zacks Consensus Estimate by a couple of cents. Also, the earnings jumped 36% from the year-ago comparable quarter’s earnings of 58 cents.

Including one-time items, earnings came in at 83 cents a share compared with 63 cents reported in the second quarter of fiscal 2012. Revenue gains at all the divisions of the company boosted its profits in the quarter.

Total revenue of this Zacks Rank #2 (Buy) company increased 10% year over year to $10,554 million and exceeded the Zacks Consensus Estimate of $10,453 million. Moreover, total segment operating income surged 29% year over year to $2,509 million, primarily driven by robust performance of all the segments. Additionally, Disney’s Parks and Resorts division continued to be the strongest performer.

Segment Details

Media Networks revenue elevated 6% year over year to $4,957 million, reflecting an increase of 9% in Cable Networks to $3,458 million, partially offset by a decline of 2% in Broadcasting revenue to $1,499 million. The segment’s operating income marked an increase of 8% to $1,862 million boosted by a 15% jump in Cable Networks operating income to $1,724 million, which reflected an increase in affiliate and advertising revenues.

This was partially offset by higher programming and production costs at ESPN. Broadcasting operating income declined 40% to $138 million, primarily due to higher programming costs and lower advertising revenue at ABC Television.

Parks and Resorts revenue rose 14% to $3,302 million, while the segment’s operating income soared 73% to $383 million, reflecting higher revenues from domestic parks and resorts as well as from international operations. The strong quarterly performance was primarily driven by the positive impact of shift in timings of the New Year and Easter holidays.

Disney remains focused on deploying its capital toward expanding its Parks and Resorts business, and in turn, enhancing its markets and creating long-term growth opportunities. Management stated that so far in the third quarter of fiscal 2013, domestic resort reservations elevated 7% and booking rates remain in line with the comparable year-ago period.

Studio Entertainment revenue increased 13% to $1,338 million, while operating income came in at $118 million compared with an operating loss of $84 million in the year-ago quarter, reflecting reduced film impairments and rise in global theatrical distribution.

Consumer Products revenue increased 12% to $763 million, while segment operating income rose 35% to $200 million, reflecting gains at Merchandise Licensing and retail business.

Interactive Media revenue for the quarter increased 8% to $194 million, while operating loss marked a significant improvement and came in at $54 million, $16 million lower than $70 million reported in the comparable year-ago quarter. The improved year-over-year performance reflects revenue gains at Japan mobile business and reduced acquisition accounting expenses at the company’s social games business.

Other Financial Details

During the quarter, Disney generated free cash flow of $1,586 million compared with $335 million in the same period last year. The company ended the quarter with cash and cash equivalents of $3,952 million, borrowings of $13,381 million, and shareholders’ equity of $42,089 million, excluding non-controlling interest of $2,055 million.

Strong results poise the company well to enhance shareholders value through share repurchases. During the reported quarter, it bought back 15.8 million shares for approximately $850 million. Fiscal year-to-date, the company bought back 38 million shares worth approximately $2 billion.

Other Stocks to Consider

Apart from Disney, other stocks in the media industry worth considering include CTC Media, Inc. , CBS Corp. (CBS - Free Report) and Entercom Communications Corp. (ETM - Free Report) . Currently, CTC Media holds a Zacks Rank #1 (Strong Buy) while CBS and Entercom carry a Zacks Rank #2 (Buy).

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