Disney Ends Fiscal 2016 on Weak Note

Revenue fell 3% year on year to $13.1 billion as the company suffered from one less week versus the fiscal fourth quarter last year. Media networks revenue dropped 3% as the 7% decline in cable networks more than offset 8% growth at the broadcasting segment. Excluding the extra week, affiliate fee revenue at cable was up 3% in the quarter and up 5% at broadcasting. Parks and resorts growth of 1% reflected the impact of the opening of the Shanghai resort, which offset the decline at EuroDisney due to terrorism fears. Management now expects Shanghai to be around break-even in fiscal 2017. The 17% decline at consumer products was due primarily to the discontinuation of the Infinity game series. EBITDA for the firm fell 10% to $3.2 billion due in part to lower revenue along with increased marketing and programming costs.

Management attempted to shift investor focus from the weak fiscal 2017 to fiscal 2018 and beyond. The firm projects fiscal 2017 EPS growth to be “modest” despite a projected stock buyback of $7 billion-$8 billion. CEO Bob Iger pointed to growth in fiscal 2018 and beyond by noting that the company projects to have a very strong film slate in that year with four Marvel films (including the third Avengers film), three animated films (including Incredibles 2), and two Star Wars films (including Episode VIII). Iger also expects ESPN to benefit from the proliferation of new over-the-top pay TV providers such as DirecTV Now, which is expected to launch this month.

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