Disney reports rare earnings miss, shares sink

Tue May 10, 2016 7:26pm EDT
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By Lisa Richwine and Rishika Sadam

(Reuters) - Walt Disney Co, an investor favorite for consistently beating Wall Street earnings targets, reported a rare miss on Tuesday as advertising and subscriptions declined at sports channel ESPN and theme park revenue came in weaker than expected.

The home of Mickey Mouse got a boost from animated hit film "Zootopia" but it announced an exit from the console video game business as it dropped the Infinity title it launched less than three years ago.

Shares of the world's best-known entertainment company fell more than 5 percent in extended trading.

Disney and other media companies have been hit by the trend of "cord-cutting" as younger viewers opt for streaming services over cable and satellite TV channels. Investors are particularly focused on how ESPN, one of the strongest cable brands, weathers the storm.

"Cable networks continue to face meaningful headwinds and Disney has yet to really answer how they are going to restore growth," BTIG analyst Richard Greenfield said.

Excluding some items, Disney earned $1.36 per share, missing analyst average expectation of $1.40 per share. Revenue rose to $12.97 billion from $12.46 billion, below the Wall Street target of $13.19 billion, according to Thomson Reuters I/B/E/S.

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.

The company's board is searching for Iger's successor after the unexpected departure of Chief Operating Officer Tom Staggs. Some industry analysts believe Iger could be asked to stay longer.   Continued...

The Walt Disney headquarters in Burbank, California December 18, 2013. REUTERS/Eric Thayer