Shares of Walt Disney Co. dropped in extended trading after the company reported lower income at cable networks including ESPN, the company's biggest source of profit.
Disney fell as much 3.2 percent to $65 after releasing fourth-quarter results. The stock lost 2.7 percent to $67.15 at the close in New York and has gained 35 percent this year, compared with 19 percent for the Dow Jones industrial average.
Higher programming costs for football and baseball weighed on a division that typically produces 40 percent of Disney's earnings, according to Martin Pyykkonen, an analyst at Wedge Partners Corp. Profit from cable, including ESPN and the Disney Channels, declined 7 percent, Disney said Thursday in a statement.
"We remain confident in ESPN's value and continued reign as the leader in sports," Chairman and Chief Executive Robert Iger said Thursday on a conference call.
Net income for the quarter rose to $1.39 billion, or 77 cents a share, from $1.24 billion, or 68 cents, a year earlier, Burbank, Calif.-based Disney said Thursday, citing growth at its theme parks, consumer division and film studio.
Profit topped the 76-cent average of 27 analysts' estimates compiled by Bloomberg. Revenue grew 7.3 percent to $11.6 billion in the period ended Sept. 28, beating the $11.4 billion average of estimates.
Those gains were overshadowed by the rare profit drop in cable. In addition to higher programming costs, Disney recognized $172 million less in deferred affiliate revenue after recording those payments earlier in the year.
"We think the Street will view the results as soft given that cable networks revenue and operating income came in below our estimates," said Vasily Karasyov, an analyst at Sterne Agee & Leach Inc.
With capital spending falling from a peak of $3.78 billion in fiscal 2012, Disney said in September if would buy back $6 billion to $8 billion of its stock starting in 2014.