Disney bullish on parks despite Delta; investors encourage continued growth

By Lisa Richwine and Tiyashi Datta

(Reuters) – Walt Disney Co profits on Thursday beat Wall Street’s forecast for the most recent quarter as its streaming services attracted more customers than expected and US theme parks affected by the pandemic reverted to the profitability.

Shares of the entertainment company rose 5% in after-hours trading. Before the results were released, stocks had been roughly flat since the start of the year.

Disney CFO Christine McCarthy said upcoming theme park bookings at the company’s two U.S. parks, including flagship Walt Disney World, remain strong, even as COVID cases increase https: // tmsnrt.rs/2WTOZDR.

“We are still optimistic about the future of our parks business,” CEO Bob Chapek said on a call with analysts. Bookings currently exceed attendance for the quarter just ended, executives said.

Florida, home to Walt Disney World, is the epicenter of the latest COVID outbreak in the United States, recording record cases and hospitalizations in recent days.

Disney was more optimistic than some other companies about the impact of the Delta variant on operations. Southwest Airlines https://www.reuters.com/business/aerospace-defense/southwest-airlines-says-may-not-be-profitable-third-quarter-2021-08-11 and vacation rental company AirBnB https : // www.reuters.com/article/us-airbnb-results/airbnb-promises-record-third-quarter-but-warns-on-delta-impact-idUSKBN2FD24S both warned that the increased number could harm their businesses.

From April to July 3, Disney posted earnings per share of 80 cents, excluding certain items. Wall Street expected 55 cents, according to the average projection of analysts polled by Refinitiv.

Disney theme parks have welcomed more visitors as pandemic restrictions eased. Theme park revenues increased for the first time in five quarters, reaching $ 4.34 billion.

Net income for that division, which includes consumer products, reached $ 356 million, from a loss of nearly $ 1.9 billion a year earlier when many Disney parks were closed. American parks made a profit of $ 2 million, while international parks lost $ 210 million.

“We believe that the breakeven point for Disney parks in the United States this quarter is a significant turning point for the entertainment giant,” said Nicholas Hyett, equity analyst at Hargreaves Lansdown. “It weathered the storm and the good performance of the parks helped it exceed analysts’ expectations.”

Disney has bet its future on building streaming services to compete with Netflix Inc in the crowded online entertainment market.

Disney +, Hulu, and ESPN + – the company’s three online subscription offerings – have gained nearly 15 million new subscribers for a total of nearly 174 million. Disney + had 116 million paying customers at the end of the quarter, just ahead of the consensus of 115.2 million analysts polled by FactSet.

“It is evident that Disney + is now an indispensable video streaming service alongside Netflix,” said PP Foresight analyst Paolo Pescatore.

During the quarter, Disney + introduced “Loki,” a series about the shape-shifting Marvel villain, and gifted Emma Stone with the movie “Cruella” the same day it hit theaters.

In the media and entertainment distribution unit, operating profit fell 32% from a year ago to $ 2.0 billion due to increased programming costs. A year earlier, ESPN cable network bills had been cut when many sporting events were canceled.

The direct-to-consumer division, which includes Disney +, reported a loss of $ 293 million investing in TV shows, movies and other costs. This compares to a loss of $ 624 million a year earlier.

The company’s overall revenue rose 45% to $ 17.02 billion in the third quarter, beating analysts’ estimate of $ 16.76 billion, according to IBES data from Refinitiv.

Net income from continuing operations was $ 923 million, or 50 cents per share, compared with a loss of $ 4.72 billion, or $ 2.61 per share, a year earlier.

(Reporting by Lisa Richwine in Los Angeles and Tiyashi Datta in Bengaluru; Additional reporting by Eva Mathews and Subrat Patnaik in Bengaluru; Editing by Maju Samuel and Lisa Shumaker)

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