Walt Disney Co. (DIS) shares jumped to a near three-year high Friday after the media giant posted stronger-than-expected earnings for its fiscal fourth quarter and said its planned streaming service, which launches next year, will include original content such as a Star Wars prequel and a live-action Marvel series.
Disney said earnings for the three months ending in September, its fiscal fourth quarter, came in at $1.48 per share, well ahead of the Street consensus of $1.34 and up 38% from the same period last year. Group revenues rose 12% to $14.3 billion, the company said, as its theme parks and studios business offset extended subscriber declines at its ESPN sports network. Disney said its new streaming service, which will take on Netflix (NFLX) , will preview in April before a fuller launch in late 2019.
"Our Disney-branded service, which we're officially calling Disney+, will be in the U.S. market late next year, offering a rich array of original Disney, Pixar, Marvel, Star Wars and National Geographic content, along with unprecedented access to our incredible library of film and television content, including all of our new theatrical releases starting with the 2019 slate," said CEO Bob Iger.
"We're also currently developing a live-action Marvel series about Loki starring Tom Hiddleston, playing the character he's made so famous," Iger added. "And we're working on a second live action Star Wars series, a prequel to Rogue One, starring Diego Luna."
Disney shares were marked 2.95% higher at the opening bell Friday and changing hands at $119.42 each, a move that extends the stock's year-to-date gain to around 12% and values the Los Angeles, Calif.-based media group at just over $180 billion.
Theme park earnings were the key fourth quarter driver, company figures indicate, with operating profit rising 11% to $829 million. However, studio profits were also impressing, doubling to $569 million thanks to big hits such as the "Incredibles 2" and "Ant-Man and the Wasp."
Jim Cramer and his team of analysts called the results "a clean earnings beat" in a research note for members of his Action Alerts PLUS club for investors. "If we were to nitpick, we would point out that TV viewership is still working against the company's favor, but management has mitigated this risk through its initiatives that aggregate its content and go directly to the consumer." (Cramer's charitable trust owns DIS, and you can read their full analysis of the results here.)
However, analysts a Pivotal Research noted that "while we thought the quarter was a relatively good one overall," a more competitive market for sports rights, as well as the broader costs of building an online streaming business "reinforced our view that Disney's valuation is stretched."
"Cable programming cost increases at mid-single digits for 2019 is not the issue; instead, the problem will occur within a few years when Facebook, Amazon and presumably Google bid for top tier sports rights in a meaningful way (double digit average inflation is a more realistic expectation over a decade of time)," the group noted.
"Comments that ESPN Plus sports rights will have an adverse impact of -$100mm during the upcoming quarter was a reminder that streaming services will require significant investments in content and that margins are likely going to be lower vs. legacy businesses)," Pivotal added.
(This article has been updated.)