Earnings Review: The Walt Disney Company

  • Walt Disney beat on earnings but missed on revenues.
  • Cable Networks was hit badly but Parks and Resorts and Movies look good.
  • Seems like Bob Iger is staying longer and he seems to have a plan for ESPN.

Disney Interactive Media Group(DIS) provides online interactive entertainment services. The firm specializes in entertainment, media and studios. The company is headquartered in Burbank, CA. The company reported an earnings beat but missed on revenues. Disney reported earnings of $1.55/share compared to investor expectations of $1.50/share. In terms of revenue, the company reported $14.78 billion which was a miss as investors expected $15.26 billion. I expected Disney to have $1.52/share in earnings and $15.29 billion in revenue. This earnings projection got me a ranking of 71/232 analysts.

Revenue had a 3% revenue decline as they faced tough comparisons from a record quarter last year. Segment revenues were mixed for Disney as Media Networks had a larger decrease. Media Networks, Consumer Products and Interactive Media had decreases of 2% and 23% respectively. The ESPN woes are still lingering for the company as they company had higher costs from the NBA and licensing. The only segment that had revenue increase was Parks and Resorts, which had 6% revenue growth. The company has a robust movie pipeline that will boost the studio networks and interactive consumer products segments. If global growth is back Europe and China will also boost Disney’s profitability. The Shanghai Disney theme park will be additive to company.

The succession at Disney seems to be in limbo since the COO of Disney left. He was the apparent successor for Bob Iger. However, Bob Iger seems open to extending his term and this benefits Disney. This move buys time for the Board of Directors to look for a good successor for Bob Iger. Also what I like about this move is that it buys Iger time to solve the ESPN woes. Disney apparently is working on a streaming deal with YouTube for ESPN as well as deals with Hulu. Also, Disney has increased its stake in Euro Disney by buying an additional 9% with a cash injection of €1.5 billion. These are all positive moves by the company and as long as global growth improves Disney should be fine. A lower tax rate from the Trump administration will benefit them immensely. However, an protectionism from Trump might be a headwind for the company if it happens.

Verdict/Grade: It was a mixed quarter from Disney, I didn’t expect them to miss revenue like that. However, the company was facing tough comparisons and the ESPN woes were known. There movie pipeline this year into 2018 is good and will drive earnings in the future. The company trades at 19x earnings and has a dividend yield of 1.43% and has room to grow. This is a stock I like as a long term value investor. If the stock goes below $105 I will be adding more to my position.

Disclosure: Cresco has a position in The Walt Disney Company.

Additional disclosure: This article is intended for information, engagement & entertainment purposes only, and is not to be construed as investment advice or direction. Investors are strongly encouraged to perform due diligence and/or consult with their financial advisor.

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