Disney Direct-To-Consumer Segment Profits In Q2, 'Operating Income Modestly Ahead' Of Analyst Expectations

Shares of The Walt Disney Company DIS are sliding Tuesday after reporting second-quarter financial results.

The Burbank, California-based company’s direct-to-consumer segment reached profitability in the second quarter — a key highlight for Bank of America analyst Jessica Reif Ehrlich.

Here's what Ehrlich is saying about the report that saw Disney beat earnings per share and miss revenue estimates from analysts.

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The Disney Analyst: Ehrlich reiterates a Buy rating and $145 price target on Disney.

The Analyst Takeaways: "Disney reported a solid F2Q with revenue essentially inline and operating income modestly ahead of our expectations," Ehrich said.

The analyst said Disney's direct-to-consumer segment outperformance came as the linear segment had lower results than expected.

"Lower domestic revenue was driven by lower affiliate revenue due to the non-renewal of carriage of certain networks and a decline in advertising revenue attributable to a lower average viewership," he said.

Direct-to-consumer operating income of $47 million beat the analyst's estimate of a loss of $100 million for the quarter. Subscriber adds for Disney+ of 6.3 million were also ahead of the analyst's estimate of 6 million for the quarter.

Guidance from Disney is mixed. Earnings per share for the full-year are guided to grow 25%, up from a previous guide of 20%.

The company said the entertainment direct-to-consumer and parks segments could have lower results in the third quarter.

"Disney expects softer Entertainment DTC results in FY3Q but continues to expect the combined streaming business to be profitable in F4Q."

The analyst said Disney "has a collection of best-in-class premiere assets." Near-term catalysts include updates on strategic priorities for the company and profitability for the DTC segment.

DIS Price Action: Disney shares are down more than 9% to $104.92 on Tuesday versus a 52-week trading range of $78.73 to $123.74. Disney shares are up 3% in the last year.  

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