Disney 2Q earnings beat Street, helped by 'Frozen'

RYAN NAKASHIMA
This Jan. 31, 2014 photo shows plush Disney characters piled up in a display at a Disney Store in Saugus, Mass. Disney reports quarterly earnings on Tuesday, May 6, 2014. (AP Photo/Elise Amendola)

LOS ANGELES (AP) — Disney on Tuesday posted second-quarter earnings that beat Wall Street forecasts, helped by the home video sales of blockbuster movies "Frozen" and "Thor: The Dark World."

Both films showed the power of buying multibillion-dollar content brands. "Thor" comes from Disney's $4 billion purchase of Marvel Entertainment in 2009. "Frozen" was a direct result of adding creative talent from Pixar after Disney bought it for $7.4 billion in 2006.

When combined with its $4 billion acquisition of Lucasfilm in 2012 and the release of three more installments in the "Star Wars" franchise starting in December 2015, Disney CEO Bob Iger said he expects the motion-picture business to grow, fueled by international sales, bucking the industrywide decline in disc sales and a low-growth domestic theatrical market.

"The strategy of making branded movies is definitely working, and I think that we really are just seeing the beginnings of it in terms of their impact on the company," Iger said.

Net income in the three months through March jumped 27 percent to $1.92 billion, or $1.08 per share, from $1.51 billion, or 83 cents per share, in the same period a year ago.

Excluding charges for foreign exchange losses and restructuring, adjusted earnings came to $1.11 per share, beating the 96 cents expected by analysts polled by FactSet.

Revenue grew 10 percent to $11.65 billion, trumping the $11.25 billion analysts expected.

The biggest surprise was the strength of the movie studio, which saw revenue increase by 35 percent to $1.8 billion and operating income quadruple to $475 million.

"It was a good clean beat from the studio," said Brett Harriss, an analyst with Gabelli & Co. "All the other divisions were solid."

Revenue from Disney's TV business rose 4 percent to $5.13 billion, and operating income rose 15 percent to $2.13 billion. The company said audience ratings were down at both ESPN and ABC, but it got higher prices for commercial time. Harriss took that as a "bullish" sign for future advertising sales.

Parks and resorts revenue rose 8 percent to $3.56 billion thanks to higher domestic attendance and higher guest spending. The company said last week that it would boost spending on its newest park in Shanghai by $800 million to account for higher expected demand when it opens in late 2015.

Consumer products revenue grew 16 percent to $885 million, also lifted by "Frozen," whose merchandise accounted for nine of the top 10 best-selling items in Disney Stores. Iger said "Frozen" had become one of Disney's best franchises. It is increasing the film's characters in its parks, developing a Broadway show and working on books and interactive products. He said he expects the impact of the hit to last for at least the next five years.

The interactive division eked out a small profit for its third consecutive quarter, a turnaround helped by the Disney Infinity video game.

Shares of Burbank, California-based The Walt Disney Co. rose 45 cents to $81.48 in after-hours trading following the earnings release. Earlier, shares fell 19 cents to close the regular session at $81.03.