Disney (DIS - Free Disney Stock Report), the media, theme park, and film conglomerate, has reported solid results for its fiscal 2011 first quarter (ended January 1st). The Dow-30 component's share earnings for the quarter were $0.68, handily exceeding our estimate of $0.56 and last year's $0.47 showing. Each major operating segment experienced strong profit growth, especially Media Networks and Studio Entertainment. Overall, the top-line advanced 10% year over year. Moreover, profitability gains played a large role in the bottom-line advance, as the margin on the additional revenue was wide. This factor appears to have been driven by a more favorable revenue mix and pricing initiatives.

Profits from the cable networks were bolstered by heightened advertising rates and better volumes, along with higher affiliate fee pricing. This was the case at ESPN, where the Rose Bowl was broadcast this year, having been shifted from ABC. In fact, demand for sporting event advertising has been very strong. Also, the Disney Channel is realizing subscriber growth internationally. Meanwhile, at ABC, as anticipated, rising ad pricing and lower sports programming costs mitigated the effect on ad demand of declining viewership ratings.

Elsewhere, an earnings revival may well be under way in the Parks and Resorts division. A revenue advance of 8% was propelled by higher average ticket prices, along with increased concession sales, substantially assisting the bottom line. Hotel occupancy and park attendance are also edging up. Labor and employee cost hikes only partially offset the positive factors.

The Studio Entertainment segment capitalized on the extraordinary appeal of the Toy Story 3 DVD, as well as the December 2009 Marvel acquisition. Accordingly, although divisional revenues were flat, growth in high-margined home entertainment revenues lifted segment operating income more than 50% in the quarter. Concurrently, Consumer Products sales rose 24% behind the same film character catalysts. Finally, the modestly sized Interactive division recorded a small loss.

Looking to the balance of fiscal 2011, a continued economic recovery and several likely lucrative studio releases should enhance bottom-line results. We have raised our fiscal 2011 share-earnings estimate by $0.25, to $2.65.

The stock, which has been strong of late, bounded ahead further, hitting another multi-year high, following the earnings release.

About The Company: The Walt Disney Company operates Media Networks such as ABC and ESPN, and Studio Entertainment. Its world famous parks and resorts include Disneyland, Walt Disney World (Magic Kingdom, Epcot, Disney’s Hollywood Studios), while the company earns royalties from Tokyo Disneyland and manages Disneyland Resort Paris and Hong Kong Disneyland. It also operates a cruise line and Consumer Products and Interactive Media segments. ABC was acquired in February, 1996, Pixar in May, 2006, and Marvel in December, 2009.


At the time of this article’s writing, the author did not have positions in any of the companies mentioned.