Media conglomerate and Dow-30 component The Walt Disney Company (DIS – Free Walt Disney Stock Report) has posted stellar fiscal second-quarter (year ends September 30th) results. Earnings soared 30% year over year, to $1.08 a share, and revenues climbed 10%, to about $11.6 billion. (These results handily beat our top- and bottom-line estimates of $11.23 billion and $0.95, respectively.) Investors seemed enthused by the news, and the stock rose slightly in early morning trading.
The company is operating on all cylinders. Disney posted solid revenues and earnings comparisons in all of its businesses. Its Interactive segment registered an operating profit during the interim, thanks in large part to Disney Infinity (its video gaming platform). Profits at Consumer Products were up 37%, while Media Networks and Parks & Resorts reported income increases in the mid-teens. But, most notably, Studio Entertainment's earnings grew four-fold during the interim.
The success of winter blockbuster Frozen continued to support totals over the quarter. The Arendelle fairy tale became the highest grossing animated movie, and its soundtrack – and “Let It Go” earworm – is still topping the billboard charts. Indeed, Olaf and friends performed well in international theaters, and the domestic home video release blew in nicely. Likewise, Marvel's releases, Thor and Captain America, also gained momentum during the period.
Looking ahead, we believe Disney's studio strategy of investing in its content will augur well. The production company recently announced the cast of Star Wars, Episode 7. This latest J.J. Abrams project, slated to hit theaters on December 18, 2015, ought to boost the studio's totals in fiscal 2016. Meanwhile, the other Marvel franchises should spur sales and earnings in the nearer term.
In addition, merchandising and licensing of its popular movie characters (such as Anna and Elsa from Frozen) ought to drive Consumer Products' results. What's more, Disney will likely leverage its movie franchises to build brand equity.
Elsewhere, Disney's Parks & Resorts put in a nice showing for the interim, even though Easter fell out in the third quarter. The segment benefited from the rollout of MyMagic+. This program aims at improving the guest experience by enabling customers to pre-plan their vacations. In all, booking rates have been pacing upward, and the recent expansion of the company's domestic and international properties should provide nice returns.
The integration of Disney's recent acquisition of online video content developer Maker Studios seems to be going well. We think this move will help the conglomerate's Media Networks segment going forward. The company's television and cable networks have been bringing more of its content online and strengthening its distribution channels. Plus, the latest purchase ought to help Disney better market its movies and television shows.
All told, we believe the success of Disney's movie franchises, investments in its operations, and strong branding efforts will support near- and long-term growth. Too, ongoing stock buybacks are liable to boost per-share comparisons. To wit, we are adding a nickel to our bottom-line forecast. We now look for earnings to climb 20%-25%, to $4.10 a share, in fiscal 2014.
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.