Disney earnings beat aided by media networks, as new streaming service looms

Walt Disney Company shares rose in after-hours trading on Tuesday as the media and entertainment giant posted earnings and revenue that exceeded Wall Street’s expectations, in part due to strength in media networks.

The company said first-quarter adjusted earnings per share fell 3 percent to $1.84, topping analysts’ expectation of $1.55, according to Refinitiv data. Quarterly revenue was $15.30 billion, beating an expected $15.14 billion.

Within Disney’s media networks, revenue rose 7 percent to $5.9 billion. Disney’s booming studio entertainment division posted a 27 percent decline, due to an unfavorable comparison to the same quarter one year ago, which featured the release of box office smashes “Star Wars: The Last Jedi” and “Thor: Ragnorak.”

“After a solid first quarter, with diluted EPS of $1.86, we look forward to the transformative year ahead, including the successful completion of our 21st Century Fox acquisition and the launch of our Disney+ streaming service,” Disney CEO and Chairman Bob Iger said in a statement. “Building a robust direct-to-consumer business is our top priority, and we continue to invest in exceptional content and innovative technology to drive our success in this space.”

Disney is buying 21st Century Fox's entertainment assets in a deal valued at $71 billion. The deal is expected to close in the first quarter of 2019 and will create 'New Fox', parent company of FOX Business and Fox News.

Disney executives declined to comment on efforts to sell Fox's regional sports networks, as required to satisfy the acquisition deal's regulatory requirements.

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The results come as Disney prepares to challenge Netflix’s dominance of the streaming sector with the launch of its own platform, Disney Plus, later this year. The network will feature content from Disney’s various media properties, including Marvel and Star Wars.

Disney launched an ESPN-branded streaming service, ESPN Plus, last year. Iger said the service now has two million paid subscribers. Asked about the growing number of states who are legalizing sports betting, Iger said he expects ESPN will cover the industry and provide information to bettors, but added it was unlikely that Disney would become an active participant in the gambling space.

The company said it incurred a quarterly operating loss of $136 million in the first quarter related to efforts to build out the services.