Bloomberg News

Disney’s Earnings Jump 27% as ‘Frozen’ Tops DVD Charts (1)

May 07, 2014

Disney's "Frozen"

Josh Gad, who voices a goofy snowman Olaf in Disney's "Frozen", poses for a photograph next to a banner of the film in Toronto. Photographer: Vince Talotta/Toronto Star via Getty Images

“Frozen” continues to sizzle for Walt Disney Co. (DIS:US), where quarterly profit rose 27 percent as kids snapped up DVDs and merchandise tied to the animated mega-hit.

Disney, the world’s largest entertainment company, reported second-quarter net income of $1.92 billion, or $1.08 a share, beating (DIS:US) the average (DIS:US) of analysts’ estimates. Sales grew to $11.6 billion, the company said yesterday in a statement (DIS:US), exceeding projections of $11.2 billion.

“Frozen” is working magic for Disney in home video, after scoring a record $1.17 billion in worldwide ticket sales, the most for an animated feature. The film was also the top-selling DVD six weeks after its release, according to Rentrak Corp. Meanwhile, Disney’s other businesses, led by TV networks such as ESPN and its namesake theme parks, also delivered higher sales and profit.

“The whole thing is doing well,” said Frank Beck, president and chief investment adviser at Beck Capital Management LLC in Austin, Texas, which holds more than 45,000 Disney shares. “You talk about hitting on every cylinder.”

Disney rose (DIS:US) 1.5 percent to $82.26 at 9:34 a.m. in New York. The stock had advanced 6.1 percent this year through yesterday.

The company generated profit growth of 15 percent or more from its four largest divisions, including the film studio, where earnings rose fourfold. Excluding some items, profit totaled $1.11 a share in the quarter ended March 29, exceeding the 96-cent average of analysts’ estimates.

Earnings at the Disney studios soared to $475 million, reflecting home-video sales of “Frozen” and “Thor: The Dark World,” according to the company. Revenue grew 35 percent to $1.8 billion, Disney said.

‘Frozen’ Assets

“Frozen” came out in home video during the period and has become the company’s biggest digital and Blu-ray release ever, Robert Iger, Disney’s chairman and chief executive officer, said yesterday on a conference call (DIS:US). The company is working on related theme-park attractions and a Broadway show, with Iger predicting revenue could last for five years.

“Given the passion for this film and these characters is so extraordinary, so well beyond what we ever even imagined, it would be hard to believe that it wouldn’t sustain itself over a fairly long period of time,” he said.

With help from Marvel pictures and the resurgent Disney animation unit, film studio profit for the year may top $1 billion for the first time since 2008, Alan Gould, an analyst at Evercore Group LLC, wrote in an April 16 note. He has the equivalent of a buy rating (DIS:US) on Burbank, California-based Disney.

Operating income at Disney cable networks rose 15 percent to $1.97 billion, reflecting growth in pay-TV subscriber fees for channels such as ESPN. Revenue increased 5 percent to $3.63 billion, even as ad sales shrank at the sports channel.

Broadcast Division

Profit at the ABC broadcast unit increased 15 percent to $159 million, buoyed by higher affiliate fees and cost-cutting, the company said. Revenue was little changed at $1.5 billion, reflecting smaller audiences watching the broadcast network

Disney’s namesake theme parks increased profit 19 percent to $457 million as the division weathered a later Easter holiday, which pulled business from the January-March quarter into the current period.

The company credited higher attendance at California’s Disneyland resort and increased guest spending at Walt Disney World in Florida. Revenue grew 7.9 percent to $3.56 billion.

Profit from consumer products expanded 37 percent to $274 million, Disney said.

Disney Stores

“Nine out of the 10 highest-selling items at the Disney store in the quarter were ‘Frozen’ merchandise,” Chief Financial Officer Jay Rasulo said on the call.

Licensing revenue grew on sales of merchandise related to Disney channel program, along with products based on Mickey Mouse and Minnie and the animated feature “Planes.”

Toys and costumes featuring the film’s Elsa character have outsold perennial top-performers Cinderella and Snow White on EBay Inc. in the past year, according to Terapeak, an online commerce tracker.

The interactive division posted a profit of $14 million, reversing a loss a year earlier, on the strength of sales of Disney Infinity, the company’s video-game platform. Revenue grew 38 percent to $268 million.

To contact the reporter on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net Rob Golum, James Callan


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Companies Mentioned

  • DIS
    (Walt Disney Co/The)
    • $87.15 USD
    • 0.92
    • 1.06%
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