Walt Disney Co.’s profits fell well short of Wall Street estimates in the third quarter, dropping 28% from a year ago due in part to the poor performance of newly-acquired Fox assets, such as the box office flop “Dark Phoenix.”
The Burbank, Calif. company also continued to spend big on streaming services, further eroding profits.
Disney earned $1.35 a share on revenue of $20.25 billion during the quarter that ended June 29, the company said last week. That compared with $1.87 a share on revenue of $15.23 billion during the same period of time last year.
The estimates were substantially below projections. Analysts had predicted earnings of $1.72 a share and sales of $21.45 billion in the third quarter.
“Our third-quarter results reflect our efforts to effectively integrate the 21st Century Fox assets to enhance and advance our strategic transformation,” Disney chairman and Chief Executive Bob Iger, said in a statement.
Operating income at Disney’s movie studio grew 13% to $792 million as the company enjoyed an extraordinary run of success at the box office. “Avengers: Endgame,” released in April, grossed $2.795 billion in worldwide ticket sales, making it the highest grossing movie ever, not adjusting for inflation. The superhero film unseated James Cameron’s “Avatar,” which generated $2.79 billion in receipts and held the record for nearly 10 years. Disney’s live action remake of “Aladdin” collected $1.03 billion, while Pixar’s “Toy Story 4” grossed $959 million.
However, the company also recorded a impairment charge for “Dark Phoenix,” the recent X-Men movie from 20th Century Fox that tanked at the box office.
The quarter did not include results from “The Lion King,” which hit theaters in July and has collected $1.2 billion in ticket sales as of last week.
Disney’s media networks business, which now includes Fox channels such as FX, saw its operating income grow 7% to $2.1 billion in the quarter.
The parks and consumer products segment posted a 4% increase in operating income to $1.72 billion.
The company’s direct-to-consumer segment posted an operating loss of $553 million on revenues of $3.86 billion.
The widening loss came as Disney absorbed Fox’s Hulu stake into its business and continued to invest in streaming services ESPN+ and Disney+, which is expected to launch in November.