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Dow-30 Earnings: The Walt Disney Company – First Quarter Fiscal 2014
Media and entertainment giant Walt Disney (DIS – Free Walt Disney Stock Report) has posted strong fiscal first-quarter results (year began September 29th). Earnings jumped 34% year-to-year, to $1.03 a share, for the December period, handily topping our estimate by $0.18. Likewise, revenues came in 9% ahead of the year-earlier result, at $12.3 billion. Investors were clearly pleased with the news, and the stock turned in a stellar showing in response to the entertainment company's latest report.
Much of Disney's recent performance was due to its strong portfolio and successful branding efforts. Indeed, the media mogul posted double-digit income gains at all of its operating segments, save for its Interactive unit, where profits grew more than six-fold during the December quarter, thanks to the success of video game consul Disney Infinity. Ongoing stock buybacks also helped boost per-share comparisons.
Disney Animation's Frozen took box offices by storm. The latest princess movie achieved $870 million in global ticket sales since its Thanksgiving weekend release (and was only recently released in China), and surpassed records previously set by The Lion King. We imagine this movie will continue to lift this segment's totals in the fiscal second quarter, as well. Likewise, consumer products licensing Olaf and Friends should also build momentum and help Disney better monetize Frozen through merchandising efforts.
Other film releases, including the latest installment in Marvel's Thor franchise and Saving Mr. Banks, coupled with lower marketing expenses (thanks to fewer releases during this three-month period) helped profits of its Studio Entertainment business soar 75% year to year. Although the decline in home video sales and hefty operating costs may hurt this division, we expect the success of its movies to outweigh those factors.
Disney ought to continue investing in content and branding and will likely focus on creating new movie franchises when designing its movie slate. To this end, the conglomerate is already gearing up for Star Wars Episode 7. The Jedi franchise is on queue for December of 2015 (its first Lucasfilm release since it acquired that studio in October, 2012).
The company's Media Networks posted stronger numbers thanks to higher affiliate and advertising at ESPN (which offset softer results from its broadcasting division).
Parks & Resorts also performed nicely thanks to higher guest spending. Even though Disney contended with higher costs, as it expanded its international properties and rolled out MyMagic+ (which boosts capacity at Disney World's Magic Kingdom), was offset by higher average ticket prices and increased guest spending on things such as food and beverages. This segment may register slightly softer comparisons in the current quarter, since Easter week falls entirely in the third fiscal period.
All told, we expect the imagineer to post healthy top- and bottom-line gains in the coming quarters. Indeed, we have added a dime to our fiscal 2014 share-earnings estimate, and now look for profits to climb 15%-20%, to $4.00 a share this year.
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, and 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.