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Media conglomerate The Walt Disney Company (DIS - Free Disney Stock Report) issued fiscal first-quarter results (year ends September 29th). The company also commented on the pending acquisition of the bulk of Twenty-First Century Fox (FOXA), and updated investors on some of its other projects under way. Overall, investors seemed pleased with the news, and the stock was up modestly in after-market trading.

Revenues increased 4%, to $15.35 billion (just ahead of our $15.25 billion estimate). And earnings climbed 22% year over year, coming in at $1.89 a share, besting our $1.60-per-share estimate. Please note that this figure excludes the one-time benefit from the Tax Act ($1.00 a share), a nonrecurring gain from the sale of property rights, and restructuring charges. Without these adjustments, profits would have come in at $2.91 for the period, 88% higher than the year-ago quarter.

The company experienced softness across most of its operating units. The one bright spot was Parks & Resorts. Operating income was up 21% at its Parks, on a 13% revenue advance. Increases in guest spending and park attendance was partially offset by higher operating expenses. (Its domestic parks were adversely affected by Hurricane Matthew in the year-ago period, which did impact some year-to-year comparisons.)

Results at Studio Entertainment were down modestly year over year. Although the latest installments of its Star Wars and Thor franchises did well at the box office, lower home entertainment and TV/SVOD results dragged on this segment.

Management remarked that the company was working with regulators to ensure the Twenty-First Century Fox acquisition goes as smoothly as possible. Disney inked a definitive agreement to purchase the bulk of its industry peer for $52.4 billion in stock and the assumption of Fox's $13.7 billion in debt. The deal would create a powerhouse of brands and content, increase production capabilities, complement its direct-to-consumer approach, and expand the media empire's geographic reach.

On its own, the company remains focused on revamping its digital distribution. Specifically, it plans to unveil the ESPN direct-to-consumer business soon. And it will launch the new ESPN subscription-based app this Spring. To review, Disney outlined a new digital distribution strategy last year. It plans to launch a Disney-branded subscription-streaming platform by 2019, to better leverage its content library. And we think this was a good step in that process.

Even though the media empire experienced some sluggishness during the last quarter, we believe that it is still well positioned for the coming year. As a result, we have raised our share-net estimate by a quarter, and now look for the bottom line to increase 10%-15%, to $6.50 a share for fiscal 2018.

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.