Bussiness
Disney CFO: We are sticking with the TV business
Disney’s (DIS) box office magic is back, and that’s taking its stock to one of the happiest places on Earth for investors.
Shares of Disney surged 9% in early trading on Thursday following a solid quarterly earnings beat and upbeat long-term guidance. The company’s ticker page was the number one most active on the Yahoo Finance platform.
The advance takes Disney’s stock up about 23% year to date, out-performing the 16% gain for the Dow.
“I do think that the focus on raising the bar on quality and delivering, really, I think the best content in the industry is an indication that the magic is back at Disney”, Disney CFO Hugh Johnston said on Yahoo Finance’s Morning Brief (video above).
The financial performance of Disney’s entertainment business stole the show, no pun intended. Its sales surged 14% on the back of strong performance from Inside Out 2 and Deadpool & Wolverine. Operating profits hit $1.1 billion, up from $236 million a year ago.
Johnston believes the momentum is poised to continue with key franchise releases of Moana 2 and the Lion King coming up.
The company’s parks and linear TV businesses continue to be challenged for several reasons, however.
Sales in Disney’s experiences segment — which houses the global theme park business — only rose 1% year over year as cautious consumers kept a lid on spending. Operating income fell 5%. Attendance was relatively unchanged year over year.
Johnston said the parks business is beyond its low point, and doesn’t think venues such as Shanghai Disney would get roped into a potential Trump administration trade war with China.
“We’re about bringing smiles to people’s faces. We’re about creating moments for families. We’re about creating joy. That’s not a political thing by any stretch of the imagination. And frankly, I think most political leaders would look at Disney and say, you know what? That’s something that I want to make sure our citizens get to enjoy,” Johnston explained.
As for the linear TV network business — which includes ABC and ESPN — sales and profits dropped 6% and 38%, respectively.
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The company has undergone rounds of layoffs in its TV business the past year, but the shift to streaming continues to be fast and furious — likely requiring deeper cost cuts.
Johnston says he ran the numbers for CEO Bob Iger, and it makes more sense to stay in the traditional TV business.
“I think the core for us is really the content creation that comes out of our networks. It plays across both distribution channels, and that’s really the most important thing,” Johnston added.