Disney's earnings signal good news for the economy

Disney (DIS) did not have an outstanding quarter, but then again, no one expected it to. For its fiscal first quarter, which ended June 27, earnings per share came in at $0.51 compared with $0.66 in the same period a year ago. Revenue fell by seven percent to $8.6 billion and net income was off 26 percent to $954 million.

Economists are endlessly interested with Disney's theme park results. They seem to think if people have the money to go to Disney's parks, they can afford plenty of other things. If the theory is true, the economy is not so badly off. Disney's theme park revenue fell only nine percent to $2.75 billion in the quarter. Disney could not cut costs enough to keep operating profit in the unit at a reasonable level so it fell by 19 percent to $521 million.

The really pleasant surprise in Disney's earnings was the performance of its largest division--media networks. The main units of this group are ESPN and ABC. Revenue for media networks fell only two percent, a bit of a victory given the economic environment. Operating income for the group was down 13 percent to $1.32 billion. Programming costs hurt margins.

Disney's studio business took a beating, mostly because it had several strong films last year including National Treasure 2 and Enchanted. Revenue for the operation dropped 12 percent to $1.3 billion. Operating income swung from a $97 million profit to a $12 million loss. Wall Street is not likely to hold the performance against Disney Studios rise and fall on hits and this was not a good part of that cycle for the entertainment company.

Analysts had expected Disney to earn $0.50 in the quarter, so they should be satisfied. The stock was off about two percent after hours. Walt would have been happy.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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