(Reuters) - Walt Disney Co DIS.N posted quarterly profit that fell in line with Wall Street expectations as the media and theme park giant rode the blockbuster performance of its movie box office hits “Maleficent” and “Guardians of the Galaxy.”
Shares of Disney, which have hit record levels as the company consistently beat forecasts in recent quarters, dropped 2.5 percent in after-hours trading on Thursday. The stock closed at a record $92 before the earnings were reported.
With the TV landscape rocked by a wave of new online viewing options, Chief Executive Bob Iger bucked the trend and insisted Disney would not rush to offer standalone subscriptions to popular content such as its sports behemoth ESPN outside the traditional bundle of channels sold by cable and satellite operators.
“We don’t feel a compelling need to take a product to market right now that is a direct challenge to that multichannel bundle,” Iger told analysts during the company’s quarterly conference call on Thursday. He said he expected the current pay TV model “to remain dominant for some time.”
Disney will experiment with online offerings, Iger said, including ESPN’s planned streaming service of some NBA games.
“We think it’s actually a smart approach, because we’re going to continue to grow our digital offerings nicely,” Iger said. “But we are also going to work really hard at making sure that that bundle is viable.”
For the quarter that ended in September, net income rose to $1.50 billion, or 86 cents per share, from $1.39 billion, or 77 cents per share, a year earlier.
On an adjusted basis, the company earned 89 cents per share, in line with estimates by analysts surveyed by Thomson Reuters I/B/E/S.
“Guardians,” another hit from Disney’s Marvel studio, and “Maleficent,” starring Angelina Jolie as a black-robed villain, helped operating income in Disney’s movie studio unit more than double from a year earlier to $254 million. The company also announced it would release a fourth movie in Pixar’s blockbuster “Toy Story” franchise in June 2017. [ID:nL1N0SW3D3]
Operating income at ESPN declined due to higher contract rates for high-end National Football League and Major League Baseball games, which helped drag down the company’s cable networks unit by 1 percent to $1.3 billion.
The drop at cable networks, the company’s largest unit, likely drove Disney shares lower, said Gabelli & Company analyst Brett Harriss, who rates Disney a “hold.”
“Cable networks were a little weak,” said Harriss, who added that he expected ESPN to make up for the programming expenses in future quarters through higher fees from affiliates.
Operating income at its parks and resorts division rose 20 percent to $687 million due to increased attendance and higher ticket prices for theme park admissions.
Revenue rose to $12.39 billion, marginally above the average analyst estimate of $12.37 billion.
Up to Thursday’s close, Disney shares had gained about 20 percent this year.
Reporting by Lehar Maan in Bangalore and Lisa Richwine in Los Angeles; Editing by Saumyadeb Chakrabarty, Ronald Grover, Leslie Adler and Cynthia Osterman