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Breaking Down Disney's Q1 Earnings, Streaming Revenue, ESPN & More

Benjamin Rains

Disney DIS reported better-than-expected Q1 fiscal 2019 financial results after the closing bell Tuesday. These results, however, marked downturns from the first quarter of 2018. Still, Wall Street was likely more intrigued to see how Disney's newly revamped business units performed as the company prepares to enter the streaming TV age and take on Netflix NFLX and Amazon AMZN.

Q1 Overview

Disney’s revenues came in slightly lower than the year-ago period’s $15.351 billion at $15.303 billion. This fell well below Q4 2018’s 12% top-line expansion but managed to top our $15.18 billion Zacks Consensus Estimate. Meanwhile, the company reported adjusted EPS of $1.84, which marked a 3% decline from the year-ago period, yet crushed our $1.57 a share estimate that would have represented a nearly 17% downturn.

With that covered, it’s time to see how Disney’s key business units performed. But before we dive into this, investors should note the media powerhouse changed its core four business units as it enters a new streaming-focused phase.  

Direct-to-Consumer & International is one of Disney’s two new divisions, and it will be closely watched for years to come. Interactive Media was previously grouped together with Consumer Products, which is now joined together with Parks and Resorts to form the Parks, Experiences & Consumer Products unit. Clearly, this makes year-over-year results harder to compare this quarter and for the rest of 2019, but it was necessary for Disney to make the change.

Unit Revenue

Disney’s Media Networks division revenue climbed 7% to $5.921 billion. But as we mentioned, the prior-year quarter’s results have been changed to reflect the new division breakdowns. More specifically, Cable Networks revenue jumped 4%. However, Disney’s closely-watched ESPN division saw its operating income fall based on higher programming costs. Meanwhile, Broadcasting revenues popped 12%.

Moving on, Disney’s new Parks, Experiences & Consumer Products division’s revenues jumped 5% to $6.824 billion. Studio Entertainment saw its revenues plummet 27% to touch $1.824 billion. This isn’t that shocking for a unit that is prone to massive quarterly swings and big surprises, in either direction, based on the nature of movie release schedules and box office hits.

Lastly, Disney’s newly formed, streaming-focused Direct-to-Consumer & International unit revenues fell 1% to $918 million. More importantly, the segment’s operating loss soared from $42 million in the prior-year quarter to $136 million. Significant investment increases at ESPN+, which was launched in April 2018, and costs related to Disney+ helped account for the much larger operating loss.

Bottom Line

Disney stock climbed 0.77% to $112.66 a share during regular trading hours Tuesday. DIS stock didn’t make any major moves in either direction after-hours and hovered down roughly 5% from its 52-week high.

For now, investors are likely waiting to see how Disney’s new stand-alone streaming service, which is due out this year, does against Netflix, Amazon, and eventually AT&T T, Apple AAPL, and many others. Wall Street might also focus on costs as the firm spends heavily to roll out its new Disney+ streaming service complete with new original TV shows—and eventually Twenty-First Century Fox FOXA offerings.

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