Disney’s Third Quarter Earnings Report: $5 Billion in Revenue Growth!
One of the strangest fiscal quarters in Disney history has ended, and our favorite company has announced the results. While Wall Street wasn’t enthusiastic, Disney just did something remarkable. Let’s take a quick look at Disney’s third quarter of 2019. Friends, it was historic!
Disney’s Record Earnings
When Disney swallowed most of Fox earlier this year, everyone knew that the Mouse House would earn a great deal of revenue. This quarter was the first one where Disney entirely operated all of their new Fox assets. The net income from those departments went straight to Disney’s bottom line. And it’s a lot.
During the fiscal third quarter of 2019, Disney grossed $20.245 billion in revenue. Yes, they broke the $20 billion barrier for the first time ever. As a point of comparison, during the same quarter in 2018, Disney earned “only” $15.229 million.
You’re not imagining the growth there. Disney’s up more than $5 billion for the quarter. It’s an improvement of 32.9 percent in only one year. Wall Street is a fickle mistress, though. Forecasts had the company at $21.4 billion, and so Disney’s stock dropped after hours. I’m sure that makes sense to someone somewhere, but it’s not me.
The lone caveat here is that Disney’s net income fell dramatically. During the third quarter of 2018, the company netted $2.916 billion. This time, they fell to $1.437 billion. The business of running Fox assets and paying for them ate into Disney’s bottom line.
Disney’s Success by Division
Revenue increased in all four of Disney’s major divisions. The top earner was Media Networks. This statement isn’t surprising given that Disney now owns all of the old Fox assets.
The new products led to gains of almost $1.2 billion year-over-year. During 2018, this division grossed a respectable $5.534 billion, but it improved to $6.713 billion.
That was enough to supplant the vaunted Parks, Experiences, and Products department, which has carried Disney in recent years. Don’t worry about your beloved parks, though. This division improved seven percent year-over-year, earning $6.575 billion for the quarter.
Putting the two groups together, Disney grossed almost $13.3 billion from only two of their divisions. The Mouse’s media empire is vast and powerful. But the most substantial gains came from elsewhere.
Studio Entertainment enjoyed a historic quarter. Disney’s films division grossed $3.836 billion during the third quarter, a massive increase of almost a billion from last year’s $2.88 billion. You know by now that the company’s enjoying a record-shattering 2019.
For perspective, what Disney managed in the quarter is more than most movies studios will manage for the entire year. It helps when your wide releases include Aladdin and Avengers: Endgame.
The fourth and final division was the most impressive this quarter. The Direct-to-Consumer & International part of Disney has been easily the weakest of the four. But the situation just changed.
During the third quarter, Direct-to-Consumer grossed $3.858 billion, actually outperforming Studio Entertainment. That’s a jump of more than $3 billion over the third quarter of 2018, when the division managed a paltry $827 million. To a larger point, this section is the one with the most significant growth potential once Disney+ debuts.
Why Did the Stock Fall?
Folks, I could write a book about the madness of stock price behavior…and may do so one day. Stocks rise or fall for the craziest reasons, as day traders (over)react to any single news item.
What hurt Disney is that unreasonable projections came out in the days before their announcement. With no previous basis for a joint Fox-Disney hybrid company, people just guessed. And their guesses were too high. It’s not Disney’s fault, nor did they do anything wrong.
Someone did something wrong, though.
I’m speaking of many Fox executives, especially in the film division. Have you noticed the occasional reports of layoffs in this department? Disney’s cleaning house for a reason. Some of Fox’s tactics were shady, albeit understandable.
Once word leaked that Disney would purchase Fox assets, nobody in Fox’s film division wanted to damage their resume by releasing a bomb. Effectively, they had to audition for their job. A poor film performance would have proven problematic.
Due to this situation, Fox pushed back or washed their hands of several movie releases, ones I’ve previously mentioned such as New Mutants. The most famous example is Dark Phoenix, which everyone has known for a while would fail completely.
Disney’s new Fox assets lost $170 million in revenue last quarter. Also, it’s easy to prove the point that these employees kicked the can down the road on their worst projects. The same division had operating income of $180 million in the same quarter the previous years.
That’s a gap of $350 million in the quarter that Disney couldn’t have expected at this time last year. So, when you see that Disney has laid off more former Fox execs, you’ll know that they deserved it. Fox handed Disney a ticking time bomb in the film division.
Still, the big picture here is remarkable. Disney earned $59.4 billion in revenue during fiscal 2018. Thanks to the Fox acquisition, they just managed more than a third of that in a single quarter.
You can already see how much Disney has improved its earning potential. Oh, and Avengers: Endgame helped, too.