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Disney Q2 Profit Up, Revenue Disappoints

By Reuters
Published | Updated

LOS ANGELES – Walt Disney Co. (DIS) Tuesday reported a 41 percent increase in fiscal third quarter profit fueled by double-digit gains at its television operations, including a resurgent ABC network, and higher attendance at its theme parks.

The earnings report came as a judge ruled that the company's board did not breach its duties in awarding a $140 million severance package to former executive Michael Ovitz (search), who was ousted as the company's president after just 14 months on the job.

Disney posted quarterly net income of $851 million, or 41 cents a share, in the quarter ended June 30, up from $604 million, or 29 cents a share last year, which included a charge of 2 cents per share.

Revenues rose to $7.7 billion from $7.5 billion in the year ago quarter.

Disney, owner of the Walt Disney World (search) and Disneyland theme parks, TV networks and a movie studio, was expected to post net income of 39 cents, according to analysts polled for Reuters Estimates.

But revenue guidance was expected at $7.9 billion, according to Reuters Estimates. Meanwhile, Studio Entertainment revenue for the quarter fell 15 percent to $1.5 billion and segment operating income decreased $62 million to a loss of $34 million.

Shares of Disney, which had gained about 7 percent over the past month, slipped about 1.5 percent in after hours trade to $25.75 on the Inet electronic brokerage.

The company said in a statement that profit rose 48 percent at its TV networks, including all sports cable channel ESPN which benefited from higher fees paid by affiliates and subscriber growth.

Broadcast network ABC has had better viewership and higher advertising revenue due largely to the success of "Desperate Housewives (search)" and the drama "Lost."

Income at the company's theme parks rose 6 percent as summer tourism boosted attendance and guests spent more than they did last year.

Offsetting the gains was the $34 million operating loss in Disney's movie studio group due primarily to fewer video sales compared to one year ago, Disney said.

Income at the company's consumer product division fell 20 percent in the quarter to $61 million.

Separately, the Delaware Chancery court ruling was a vindication for outgoing Disney Chief Executive Michael Eisner (search), who had faced criticism for his handling of Ovitz and who steps down at the end of September.