Disney’s Shares Fall After a Rare Earnings Miss

The company’s third-quarter earnings and revenue fell short of analyst expectations. 

Disney delivered its third-quarter earnings report on Tuesday and the company missed the mark on revenue and earnings. This caused the company’s shares to drop more than 3% in after-hours trading. Here is an overview of the earnings report:

  • Earnings: Earnings reached $1.35 per share as opposed to the $1.75 expected by analysts.
  • Revenue: Revenue was $20.25 billion as opposed to the $21.47 billion expected by analysts.

This was largely due to the company’s March acquisition of Fox Studios. Disney was hurt by hefty integration costs and weak performance on Fox’s part.

Third-quarter headwinds that hurt Disney

Disney tends to outperform investor expectations so this earnings report was a rare downturn. However, the company was affected by a couple of unique headwinds during the third quarter.

Lower Disney theme park attendance

It’s not often that Disney sees a dip in its theme park attendance but it happened during the previous quarter. In spite of benefiting from the Easter Weekend and the Disneyland expansion, sales at its theme parks still fell short.

This is partly because Disney switched to a tiered pricing model several years ago. This means that it’s more expensive to visit the theme parks during peak visiting months. And Disney raised its ticket pricings quite a bit in 2019, possibly turning guests away. 

Disney hasn’t yet seen a payoff from its integration with Fox

Disney acquired Fox Studios for an astonishing $71 billion last March. Unfortunately, it’s taking a bit longer for the company to see any real return from its investment. The company was impacted by high integration costs as well as a weaker than expected return from Fox.

However, Disney CEO Bob Iger is confident that the company’s return on investment is coming. Acquiring Fox makes it easier for the company to compete with streaming services like Netflix and Amazon. 

On the earnings call with investors, Bob Iger stated, “We analyze the 21st Century Fox opportunity entirely through the lens of our future business.” 

What’s next for Disney?

Disney has a history of exceeding expectations so analysts were disappointed at the results of this latest earnings report. But Disney’s fundamentals are strong and its shares are up 24% year to date. 

The company has made several strategic investments this year, including acquiring both Fox and Hulu. This temporary miss is little more than an opportunity to buy in at a lower price point.