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Category: Stock Market and Walt Disney
Date: 8 November 2019 Stock Price: $132.96 (Pre market: $139.52) We take a look at entertainment giant Walt Disney's financial results for the 4th quarter of their 2019 financial year. With the US economy booming are consumers spending more on entertainment for the benefit of companies such as Walt Disney? And is their streaming service taking off as the group had hoped?
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About The Walt Disney Company
The Walt Disney Company, together with its subsidiaries and affiliates, is a leading diversified international family entertainment and media enterprise with the following business segments: Media Networks; Parks, Experiences and Products; Studio Entertainment; and Direct-to-Consumer and International.
Media Networks is the primary unit of The Walt Disney Company that contains the company’s vast array of television networks, cable channels, associated production and distribution companies, and owned and operated television stations across two divisions – Walt Disney Television and ESPN.
Parks, Experiences and Products is the global hub that brings Disney’s stories, characters, and franchises to life through theme parks and resorts, cruise and vacation experiences, and consumer products—everything from toys to apparel, and books to video games.
For over 90 years, The Walt Disney Studios has been the foundation on which The Walt Disney Company was built. Today, the Studio brings quality movies, music and stage plays to consumers throughout the world. (Studios include Pixar- known for their animation movies) and Marvel Studios, 20th Century Fox and LucasFilms (Star wars movies)
Media Networks is the primary unit of The Walt Disney Company that contains the company’s vast array of television networks, cable channels, associated production and distribution companies, and owned and operated television stations across two divisions – Walt Disney Television and ESPN.
Parks, Experiences and Products is the global hub that brings Disney’s stories, characters, and franchises to life through theme parks and resorts, cruise and vacation experiences, and consumer products—everything from toys to apparel, and books to video games.
For over 90 years, The Walt Disney Studios has been the foundation on which The Walt Disney Company was built. Today, the Studio brings quality movies, music and stage plays to consumers throughout the world. (Studios include Pixar- known for their animation movies) and Marvel Studios, 20th Century Fox and LucasFilms (Star wars movies)
Financial overview of The Walt Disney Company's 4th quarter 2019 earnings report
The data below refers to the latest quarter unless specified otherwise
- Revenues: $19.1 billion (up from $14.306 billion for the same quarter of the previous year)
- Revenue increased by 33.5% over the last 12 months
- Total costs and expenses: $16.815 billion (up from $11.223 billion for the same quarter of the previous year)
- Total cost and expenses increased by 49.8% over the last 12 months
- Net income attributable to The Walt Disney Company (Disney): $ 1.054 billion (down from $ 2322 billion for the same quarter of the previous year)
- Diluted earnings per share: $0.58 (down from $ 1.55 for the same quarter of the previous year)
- PE ratio of Walt Disney : 55
- Diluted number of shares in issue: 1.816 billion (up from 1.497 billion for the same quarter of the previous year)
- Cash and cash equivalents: $5.418 billion
- Cash and equivalents per share: $2.98
- Cash and cash equivalents makes up 2.2% of Walt Disney's market capital
- Cash and cash equivalents makes up 2.7% of Walt Disney's total assets
- Receivables: $15.673 billion
- Receivables makes up 7.9% of Walt Disney's total assets
- Goodwill: $80.293billion
- Goodwill per share: $44.21
- Goodwill makes up 41.4% of Walt Disney's total assets
- Cash generated from operation (for full fiscal year): $5.94 billion
- Cash generated from operations (for full fiscal year): $3.27
The Walt Disney Company management commentary on their 4th quarter earnings
BURBANK, Calif. – The Walt Disney Company today reported earnings for its fourth quarter and fiscal year ended September 28, 2019. Diluted earnings per share (EPS) from continuing operations for the fourth quarter decreased 72% to $0.43 from $1.55 in the prior-year quarter. Excluding certain items affecting comparability(1), diluted EPS for the quarter decreased 28% to $1.07 from $1.48 in the prior-year quarter. Diluted EPS from continuing operations for the year decreased 25% to $6.27 from $8.36 in the prior year. Excluding certain items affecting comparability(1), diluted EPS from continuing operations for the year decreased 19% to $5.77 from $7.08 in the prior year. “Our solid results in the fourth quarter reflect the ongoing strength of our brands and businesses,” said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company.
“We’ve spent the last few years completely transforming The Walt Disney Company to focus the resources and immense creativity across the entire company on delivering an extraordinary direct-to-consumer experience, and we’re excited for the launch of Disney+ on November 12.”
“We’ve spent the last few years completely transforming The Walt Disney Company to focus the resources and immense creativity across the entire company on delivering an extraordinary direct-to-consumer experience, and we’re excited for the launch of Disney+ on November 12.”
Cable Networks
Cable Networks revenues for the quarter increased 20% to $4.2 billion and operating income decreased $19 million to $1.3 billion. Lower operating income was due to a decrease at ESPN, partially offset by the consolidation of TFCF businesses (primarily the FX and National Geographic networks). The decrease at ESPN was due to increases in programming, production and marketing costs, partially offset by higher affiliate revenue. Higher programming costs were driven by rate increases for NFL, college sports and MLB programming. Affiliate revenue growth was due to an increase in contractual rates and the launch of the ACC Network, partially offset by a decrease in subscribers.
Broadcasting
Broadcasting revenues for the quarter increased 26% to $2.3 billion and operating income decreased $17 million to $377 million. The decrease in operating income was due to lower results at our legacy operations, partially offset by the consolidation of TFCF program sales. The decrease at our legacy operations was due to lower ABC Studios program sales, an increase in programming and production costs at the ABC Television Network, a decrease in advertising revenue and higher marketing costs. These decreases were partially offset by an increase in affiliate revenue due to higher rates. The decrease in ABC Studios program sales was driven by the comparison to prior-year sales of Daredevil and Iron Fist and lower sales of Black-ish. The increase in programming and production costs was driven by higher write-downs and an increase in the average cost of network programming in the current quarter compared to the prior-year quarter. Lower advertising revenue reflected a decrease in rates at the owned television stations.
Equity in the Income of Investees
Equity in the income of investees decreased from $173 million in the prior-year quarter to $150 million in the current quarter due to lower income from A+E Television Networks driven by a decrease in affiliate and advertising revenues and higher marketing costs.
Parks, Experiences and Products Parks,
Experiences and Products revenues for the quarter increased 8% to $6.7 billion, and segment operating income increased 17% to $1.4 billion. Operating income growth for the quarter was due to increases from merchandise licensing, Disneyland Resort and Disney Vacation Club. Higher operating income at our merchandise licensing business was due to an increase in revenue from sales of merchandise based on Frozen and Toy Story, partially offset by lower sales of merchandise based on Mickey and Minnie. Growth at Disneyland Resort was primarily due to higher guest spending, partially offset by expenses associated with Star Wars: Galaxy’s Edge, which opened on May 31, and, to a lesser extent, lower attendance. Guest spending growth was primarily due to increases in average ticket prices and higher food, beverage and merchandise spending.
The increase in operating income at Disney Vacation Club was due to higher sales at Disney’s Riviera Resort in the current quarter, which included a timing benefit from the adoption of new revenue recognition accounting guidance (see page 6), compared to sales of Copper Creek Villas & Cabins in the prior-year quarter. Results at Walt Disney World Resort were comparable to the prior-year quarter, despite the adverse impact of Hurricane Dorian in the current quarter. Increases in guest spending and, to a lesser extent, occupied room nights and attendance were offset by higher costs. Higher costs were driven by costs associated with Star Wars: Galaxy’s Edge, which opened on August 29, and cost inflation. Guest spending growth was primarily due to increased food, beverage and merchandise spending and higher average ticket prices. Operating income at our international parks and resorts was comparable to the prior-year quarter, as growth at Disneyland Paris and Shanghai Disney Resort was largely offset by a decrease at Hong Kong Disneyland Resort. The increase at Disneyland Paris was driven by higher average ticket prices and attendance growth. At Shanghai Disney Resort, higher operating income was due to an increase in average ticket prices, partially offset by lower attendance. Lower results at Hong Kong Disneyland Resort were due to decreases in attendance and occupied room nights reflecting the impact of recent events.
Studio Entertainment
Studio Entertainment revenues for the quarter increased 52% to $3.3 billion and segment operating income increased 79% to $1,079 million. Higher operating income was due to an increase in theatrical distribution results, partially offset by a loss from the consolidation of the TFCF businesses. The increase in theatrical distribution results was due to the performance of The Lion King, Toy Story 4 and Aladdin in the current quarter compared to Incredibles 2 and Ant-Man And The Wasp in the prioryear quarter. Operating results at the TFCF businesses reflected a loss from theatrical distribution driven by the performance of Ad Astra, Art of Racing In The Rain and Dark Phoenix, partially offset by income from TV/SVOD distribution.
Direct-to-Consumer & International
Direct-to-Consumer & International revenues for the quarter increased from $0.8 billion to $3.4 billion and segment operating loss increased from $340 million to $740 million. The increase in operating loss was due to the consolidation of Hulu, costs associated with the upcoming launch of Disney+ and our ongoing investment in ESPN+, which was launched in April 2018. These decreases were partially offset by a benefit from the inclusion of the TFCF businesses driven by income at Star India. 6 Commencing March 20, 2019, as a result of our acquisition of a controlling interest in Hulu, 100% of Hulu’s operating results are included in the Direct-to-Consumer & International segment. Prior to March 20, 2019, the Company’s ownership share of Hulu results was reported as equity in the loss of investees.
Cable Networks revenues for the quarter increased 20% to $4.2 billion and operating income decreased $19 million to $1.3 billion. Lower operating income was due to a decrease at ESPN, partially offset by the consolidation of TFCF businesses (primarily the FX and National Geographic networks). The decrease at ESPN was due to increases in programming, production and marketing costs, partially offset by higher affiliate revenue. Higher programming costs were driven by rate increases for NFL, college sports and MLB programming. Affiliate revenue growth was due to an increase in contractual rates and the launch of the ACC Network, partially offset by a decrease in subscribers.
Broadcasting
Broadcasting revenues for the quarter increased 26% to $2.3 billion and operating income decreased $17 million to $377 million. The decrease in operating income was due to lower results at our legacy operations, partially offset by the consolidation of TFCF program sales. The decrease at our legacy operations was due to lower ABC Studios program sales, an increase in programming and production costs at the ABC Television Network, a decrease in advertising revenue and higher marketing costs. These decreases were partially offset by an increase in affiliate revenue due to higher rates. The decrease in ABC Studios program sales was driven by the comparison to prior-year sales of Daredevil and Iron Fist and lower sales of Black-ish. The increase in programming and production costs was driven by higher write-downs and an increase in the average cost of network programming in the current quarter compared to the prior-year quarter. Lower advertising revenue reflected a decrease in rates at the owned television stations.
Equity in the Income of Investees
Equity in the income of investees decreased from $173 million in the prior-year quarter to $150 million in the current quarter due to lower income from A+E Television Networks driven by a decrease in affiliate and advertising revenues and higher marketing costs.
Parks, Experiences and Products Parks,
Experiences and Products revenues for the quarter increased 8% to $6.7 billion, and segment operating income increased 17% to $1.4 billion. Operating income growth for the quarter was due to increases from merchandise licensing, Disneyland Resort and Disney Vacation Club. Higher operating income at our merchandise licensing business was due to an increase in revenue from sales of merchandise based on Frozen and Toy Story, partially offset by lower sales of merchandise based on Mickey and Minnie. Growth at Disneyland Resort was primarily due to higher guest spending, partially offset by expenses associated with Star Wars: Galaxy’s Edge, which opened on May 31, and, to a lesser extent, lower attendance. Guest spending growth was primarily due to increases in average ticket prices and higher food, beverage and merchandise spending.
The increase in operating income at Disney Vacation Club was due to higher sales at Disney’s Riviera Resort in the current quarter, which included a timing benefit from the adoption of new revenue recognition accounting guidance (see page 6), compared to sales of Copper Creek Villas & Cabins in the prior-year quarter. Results at Walt Disney World Resort were comparable to the prior-year quarter, despite the adverse impact of Hurricane Dorian in the current quarter. Increases in guest spending and, to a lesser extent, occupied room nights and attendance were offset by higher costs. Higher costs were driven by costs associated with Star Wars: Galaxy’s Edge, which opened on August 29, and cost inflation. Guest spending growth was primarily due to increased food, beverage and merchandise spending and higher average ticket prices. Operating income at our international parks and resorts was comparable to the prior-year quarter, as growth at Disneyland Paris and Shanghai Disney Resort was largely offset by a decrease at Hong Kong Disneyland Resort. The increase at Disneyland Paris was driven by higher average ticket prices and attendance growth. At Shanghai Disney Resort, higher operating income was due to an increase in average ticket prices, partially offset by lower attendance. Lower results at Hong Kong Disneyland Resort were due to decreases in attendance and occupied room nights reflecting the impact of recent events.
Studio Entertainment
Studio Entertainment revenues for the quarter increased 52% to $3.3 billion and segment operating income increased 79% to $1,079 million. Higher operating income was due to an increase in theatrical distribution results, partially offset by a loss from the consolidation of the TFCF businesses. The increase in theatrical distribution results was due to the performance of The Lion King, Toy Story 4 and Aladdin in the current quarter compared to Incredibles 2 and Ant-Man And The Wasp in the prioryear quarter. Operating results at the TFCF businesses reflected a loss from theatrical distribution driven by the performance of Ad Astra, Art of Racing In The Rain and Dark Phoenix, partially offset by income from TV/SVOD distribution.
Direct-to-Consumer & International
Direct-to-Consumer & International revenues for the quarter increased from $0.8 billion to $3.4 billion and segment operating loss increased from $340 million to $740 million. The increase in operating loss was due to the consolidation of Hulu, costs associated with the upcoming launch of Disney+ and our ongoing investment in ESPN+, which was launched in April 2018. These decreases were partially offset by a benefit from the inclusion of the TFCF businesses driven by income at Star India. 6 Commencing March 20, 2019, as a result of our acquisition of a controlling interest in Hulu, 100% of Hulu’s operating results are included in the Direct-to-Consumer & International segment. Prior to March 20, 2019, the Company’s ownership share of Hulu results was reported as equity in the loss of investees.
The Walt Disney Company (NYSE: DIS) stock price history
The image below shows The Walt Disney Company's share price for the last 5 years. And its been a pretty good time for Walt Disney stockholders. 5 years ago Walt Disney was trading at $91 a stock and its currently trading at $132.96. That's a healthy return of 46.4% provided to Walt Disney Stockholders over the last 5 years. The performance of the Marvel Studio over the last couple of years providing some spark for its share price, while ESPN seems to have been a drag on the group.
The stock of Walt Disney is trading a lot closer to its 52 week high of $147.15 than it is to its 52 week low of $100.35. This to us is a clear indication that the short term momentum and sentiment towards Walt Disney stock is very positive.
The stock of Walt Disney is trading a lot closer to its 52 week high of $147.15 than it is to its 52 week low of $100.35. This to us is a clear indication that the short term momentum and sentiment towards Walt Disney stock is very positive.
Recent coverage of Walt Disney
The extract below covers the latest earnings report from Walt Disney as obtained from TheStreet.com
Walt Disney Co. (DIS - Get Report) posted stronger-than-expected fourth quarter earnings Thursday as studio revenues surged past estimates, thanks in part to Toy Story 4 and The Lion King, ahead of next week's Disney+ streaming entertainment service launch. Disney said adjusted earnings for the three months ending in September, the company's fiscal fourth quarter, came in at $1.07 per share, down 27.7% from the same period last year but firmly ahead of the Street consensus forecast of 95 cents per share. Group revenues, Disney said, rose 34% to $19.01 billion, just shy of analysts' forecasts of $19.04 billion.
"Our solid results in the fourth quarter reflect the ongoing strength of our brands and businesses," said CEO Bob Iger. "We've spent the last few years completely transforming The Walt Disney Company to focus the resources and immense creativity across the entire company on delivering an extraordinary direct-to-consumer experience, and we're excited for the launch of Disney+ on November 12." Disney shares were marked 5.9% higher in extended hours trading Thursday immediately following the earnings release at $140.76 each, a move that would extend the stock's year-to-date gain to around 28.4% if it holds into Friday's opening bell.
Read the full article here
Walt Disney Co. (DIS - Get Report) posted stronger-than-expected fourth quarter earnings Thursday as studio revenues surged past estimates, thanks in part to Toy Story 4 and The Lion King, ahead of next week's Disney+ streaming entertainment service launch. Disney said adjusted earnings for the three months ending in September, the company's fiscal fourth quarter, came in at $1.07 per share, down 27.7% from the same period last year but firmly ahead of the Street consensus forecast of 95 cents per share. Group revenues, Disney said, rose 34% to $19.01 billion, just shy of analysts' forecasts of $19.04 billion.
"Our solid results in the fourth quarter reflect the ongoing strength of our brands and businesses," said CEO Bob Iger. "We've spent the last few years completely transforming The Walt Disney Company to focus the resources and immense creativity across the entire company on delivering an extraordinary direct-to-consumer experience, and we're excited for the launch of Disney+ on November 12." Disney shares were marked 5.9% higher in extended hours trading Thursday immediately following the earnings release at $140.76 each, a move that would extend the stock's year-to-date gain to around 28.4% if it holds into Friday's opening bell.
Read the full article here
The Walt Disney Company (NYSE: DIS) stock valuation
So based on Walt Disney's latest earnings report what do we value Walt Disney's stock at? Based on their earnings reported our valuation model provides a target (full value) price for Walt Disney's at $137.10 per stock (up from our 3rd quarter 2019 earnings report valuation of Walt Disney).
We therefore believe that the stock of Walt Disney's is close to being fully valued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $137.10. A good entry price into Walt Disney would therefore be at $123.40 or below.
We expect the stock of Walt Disney to trade in a narrow range around our target (full value) price in coming weeks and months
We therefore believe that the stock of Walt Disney's is close to being fully valued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $137.10. A good entry price into Walt Disney would therefore be at $123.40 or below.
We expect the stock of Walt Disney to trade in a narrow range around our target (full value) price in coming weeks and months
Next earnings release of Walt Disney
The Walt Disney Company is expected to release their 1st quarter 2020 earnings report in early February 2020