Disney reported quarterly earnings Tuesday that fell short of forecasts, and announced it is discontinuing its Disney Infinity line of video games.
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Disney shares fell more than 6% in after-hours trading after the company failed for the first time in two years to meet expectations for revenue and earnings. The stock was up just 1.4 percent since the start of the year, though.
Analysts fear the erosion of the conventional cable business due to the rise of mobile media and video streaming could harm ESPN, the sports channels that have always been essential to cable television viewer packages and so strong earners.
For the first time in years, Disney earnings fell short of estimates, according to analysts – and that caused its stock to sharply fall in aftermarket trading.
Cable networks also got lower equity income from A+E Networks because of a decrease in advertising revenue, higher programming costs and a negative impact from the conversion of the H2 channel to Viceland.
Disney said parks revenue is up 4 percent for the quarter compared to past year, but that is due to guest spending growth, all caused by higher ticket prices, higher food and merchandise spending and higher room rates.
Investors focused on the numbers from its media networks, particularly Disney’s sports empire, ESPN, which once again saw a decline a subscribers.
Revenue was up finishing the quarter at $12.97 billion compared to previous year during the same period of $12.46 billion, but missing the target set by Wall Street of $13.19 billion. Studio entertainment revenue grew 22% to $2.1 billion in 2Q. It added that it had higher costs at Disneyland Paris and fewer visitors than expected at its park in Hong Kong.
However, revenue missed Wall Street expectations at the cable networks of Disney, its theme parks and its consumer divisions, showed data released on Tuesday afternoon.
Disney hailed the segment’s “unprecedented winning streak at the box office”, boosted by Star Wars: The Force Awakens and Zootopia. It also laid off about 300 employees, a lot of them based in Salt Lake City at Avalanche Software, a game studio Disney bought in 2005.
The net income attributable to company rose to US$2.14 billion, or US$1.30 per share, in the second quarter ended April 2, from U.S. $2.11 billion, or $1.23 per share, a year earlier.
Reported earnings were $1.30 per share, a 6% year over year increase from the year-ago quarter’s $1.23 per share.
Walt Disney Company (NYSE:DIS) increased +1.20% to $106.60 while traded 15.18 million shares on 5/10/2016.
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Chief Executive Bob Iger told analysts he does not “currently have any plans” to stay at Disney beyond his contract’s expiration in June 2018.
