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Category: Stock Market and Walt Disney
Date: 5 February 2020 Stock Price: $144.73 We take a look at entertainment giant Walt Disney's financial results for the 1st quarter of their 2020 fiscal 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? And has the group continued to cash in on their hit Marvel movies
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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: $20.858 billion (up from $15.303 billion for the same quarter of the previous year)
- Revenue increased by 36.3% over the last 12 months
- Total costs and expenses: $18.017 billion (up from $11.885 billion for the same quarter of the previous year)
- Total cost and expenses increased by 51.59% over the last 12 months
- So some margin pressure on Walt Disney, as their fast growing revenues is more than offset with increased costs and expenses
- Net income attributable to The Walt Disney Company (Disney): $2.107 billion (down from $2.788 billion for the same quarter of the previous year)
- Diluted earnings per share: $1.16 (down from $ 1.86 for the same quarter of the previous year)
- PE ratio of Walt Disney : 31
- Diluted number of shares in issue: 1.817 billion (up from 1.498 billion for the same quarter of the previous year)
- Cash and cash equivalents: $6.833 billion
- Cash and equivalents per share: $3.76
- Cash and cash equivalents makes up 2.59% of Walt Disney's market capital
- Cash and cash equivalents makes up 3.4% of Walt Disney's total assets
- Receivables of Walt Disney: $17.1 billion
- Receivables makes up 9.41% of Walt Disney's total assets
- Goodwill of Walt Disney: $80.314 billion
- Goodwill per share: $44.20
- Goodwill makes up 39.96% of Walt Disney's total assets
- Cash generated from operation: $1.630 billion
- Cash generated from operations: $0.89
The Walt Disney Company management commentary on their 4th quarter earnings
BURBANK, Calif. – The Walt Disney Company today reported earnings for its first fiscal quarter ended December 28, 2019. Diluted earnings per share (EPS) from continuing operations for the quarter decreased 37% to $1.17 from $1.86 in the prior-year quarter. Excluding certain items affecting comparability(1), diluted EPS for the quarter decreased 17% to $1.53 from $1.84 in the prior-year quarter.
“We had a strong first quarter, highlighted by the launch of Disney+, which has exceeded even our greatest expectations,” said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company. “Thanks to our incredible collection of brands, outstanding content from our creative engines and state-of-the-art technology, we believe our direct-to-consumer services, including Disney+, ESPN+ and Hulu, position us well for continued growth in today’s dynamic media environment.”
“We had a strong first quarter, highlighted by the launch of Disney+, which has exceeded even our greatest expectations,” said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company. “Thanks to our incredible collection of brands, outstanding content from our creative engines and state-of-the-art technology, we believe our direct-to-consumer services, including Disney+, ESPN+ and Hulu, position us well for continued growth in today’s dynamic media environment.”
Cable Networks
Cable Networks revenues for the quarter increased 20% to $4.8 billion and operating income increased 16% to $862 million. Higher operating income was due to the consolidation of TFCF businesses (primarily the FX and National Geographic networks), partially offset by a decrease at ESPN. The decrease at ESPN was due to an increase in programming and production costs and lower advertising revenue, partially offset by higher affiliate revenue. Higher programming and production costs were driven by rate increases for NFL, College Football Playoffs and other college sports programming as well as costs for the ACC Network, which launched in August 2019. The decrease in advertising revenue was due to lower average viewership. Affiliate revenue growth was due to an increase in contractual rates, partially offset by a decrease in subscribers. The decrease in subscribers was net of the impact of the ACC Network.
Broadcasting
Broadcasting revenues for the quarter increased 34% to $2.6 billion and operating income increased 41% to $575 million. The increase in operating income was due to the consolidation of TFCF, largely reflecting program sales, and a timing benefit from new accounting guidance, partially offset by lower results at our legacy operations. At the beginning of fiscal 2020, the Company adopted new accounting guidance, which removes certain limitations on the capitalization of episodic television production costs. Compared to the previous accounting, programming and production expense will generally be lower in the first half of the fiscal year and higher in the second half of the fiscal year as the capitalized costs are amortized. The decrease at our legacy operations was due to lower advertising revenue, a decrease in ABC Studios program sales and higher network programming and production costs, partially offset by an increase in affiliate revenue due to higher rates. Lower advertising revenue reflected decreases at the owned television stations and in average network viewership, partially offset by higher network rates. The decrease in ABC Studios program sales was driven by the comparison to the prior-year sale of The Punisher. Higher network programming and production costs were driven by a higher cost mix of programming in the current quarter compared to the prior-year quarter.
Equity in the Income of Investees
Equity in the income of investees increased from $179 million in the prior-year quarter to $193 million in the current quarter primarily due to higher income from A+E Television Networks driven by lower programming costs and higher advertising revenue.
Parks, Experiences and Products Parks
Parks, Experiences and Products revenues for the quarter increased 8% to $7.4 billion, and segment operating income increased 9% to $2.3 billion. Operating income growth for the quarter was due to increases at merchandise licensing and domestic parks and resorts, partially offset by lower results at our international parks and resorts. Higher merchandise licensing results were due to an increase in revenue from sales of merchandise based on Frozen, Star Wars and Toy Story, partially offset by lower sales of merchandise based on Mickey and Minnie. Growth at our domestic parks and resorts was due to higher guest spending and, to a lesser extent, increased attendance, partially offset by higher costs. Guest spending growth was primarily due to higher average ticket prices and an increase in food, beverage and merchandise spending. Higher costs were due to new guest offerings, driven by Star Wars: Galaxy’s Edge, and the impact of wage increases for union employees. The decrease in operating income at our international parks and resorts was due to lower results at Hong Kong Disneyland Resort, partially offset by growth at Shanghai Disney Resort. Lower results at Hong Kong Disneyland Resort were due to decreases in attendance and occupied room nights reflecting the impact of recent events. At Shanghai Disney Resort, higher operating income was driven by an increase in attendance.
Studio Entertainment
Studio Entertainment revenues for the quarter increased from $1.8 billion to $3.8 billion and segment operating income increased from $309 million to $948 million. Higher operating income was due to increases in theatrical and TV/SVOD distribution results at our legacy operations, partially offset by a loss from the consolidation of the TFCF businesses. The increase in theatrical distribution results was due to the performance of Frozen II and Star Wars: The Rise Of Skywalker in the current quarter compared to Ralph Breaks the Internet in the prioryear quarter. The prior-year quarter also included Mary Poppins Returns and The Nutcracker and the Four Realms and the current quarter included Maleficent: Mistress of Evil. Growth in TV/SVOD distribution results was due to sales of content to Disney+, partially offset by a decrease in pay television sales to third parties. Operating results at the TFCF businesses reflected income from TV/SVOD distribution, which was more than offset by a loss from theatrical distribution and general and administrative costs. TFCF theatrical releases in the current quarter included Spies in Disguise, Ford v. Ferrari and Terminator: Dark Fate.
Direct-to-Consumer & International
Direct-to-Consumer & International revenues for the quarter increased from $0.9 billion to $4.0 billion and segment operating loss increased from $136 million to $693 million. The increase in operating loss was due to costs associated with the launch of Disney+, the consolidation of Hulu and a higher loss at ESPN+. These increases were partially offset by a benefit from the inclusion of the TFCF businesses due to income at the international channels including Star. The increase in operating loss at ESPN+ was primarily due to higher programming costs, primarily for Ultimate Fighting Championship (UFC) rights, and an increase in marketing spend, partially offset by subscriber revenue growth and UFC pay-per-view fees. Commencing March 20, 2019, as a result of our acquisition of a controlling interest in Hulu, 100% of Hulu’s revenues and expenses are included in the Direct-to-Consumer & International segment. Prior to March 20, 2019, only the Company’s ownership share of Hulu results was included (as equity in the loss of investees).
Cable Networks revenues for the quarter increased 20% to $4.8 billion and operating income increased 16% to $862 million. Higher operating income was due to the consolidation of TFCF businesses (primarily the FX and National Geographic networks), partially offset by a decrease at ESPN. The decrease at ESPN was due to an increase in programming and production costs and lower advertising revenue, partially offset by higher affiliate revenue. Higher programming and production costs were driven by rate increases for NFL, College Football Playoffs and other college sports programming as well as costs for the ACC Network, which launched in August 2019. The decrease in advertising revenue was due to lower average viewership. Affiliate revenue growth was due to an increase in contractual rates, partially offset by a decrease in subscribers. The decrease in subscribers was net of the impact of the ACC Network.
Broadcasting
Broadcasting revenues for the quarter increased 34% to $2.6 billion and operating income increased 41% to $575 million. The increase in operating income was due to the consolidation of TFCF, largely reflecting program sales, and a timing benefit from new accounting guidance, partially offset by lower results at our legacy operations. At the beginning of fiscal 2020, the Company adopted new accounting guidance, which removes certain limitations on the capitalization of episodic television production costs. Compared to the previous accounting, programming and production expense will generally be lower in the first half of the fiscal year and higher in the second half of the fiscal year as the capitalized costs are amortized. The decrease at our legacy operations was due to lower advertising revenue, a decrease in ABC Studios program sales and higher network programming and production costs, partially offset by an increase in affiliate revenue due to higher rates. Lower advertising revenue reflected decreases at the owned television stations and in average network viewership, partially offset by higher network rates. The decrease in ABC Studios program sales was driven by the comparison to the prior-year sale of The Punisher. Higher network programming and production costs were driven by a higher cost mix of programming in the current quarter compared to the prior-year quarter.
Equity in the Income of Investees
Equity in the income of investees increased from $179 million in the prior-year quarter to $193 million in the current quarter primarily due to higher income from A+E Television Networks driven by lower programming costs and higher advertising revenue.
Parks, Experiences and Products Parks
Parks, Experiences and Products revenues for the quarter increased 8% to $7.4 billion, and segment operating income increased 9% to $2.3 billion. Operating income growth for the quarter was due to increases at merchandise licensing and domestic parks and resorts, partially offset by lower results at our international parks and resorts. Higher merchandise licensing results were due to an increase in revenue from sales of merchandise based on Frozen, Star Wars and Toy Story, partially offset by lower sales of merchandise based on Mickey and Minnie. Growth at our domestic parks and resorts was due to higher guest spending and, to a lesser extent, increased attendance, partially offset by higher costs. Guest spending growth was primarily due to higher average ticket prices and an increase in food, beverage and merchandise spending. Higher costs were due to new guest offerings, driven by Star Wars: Galaxy’s Edge, and the impact of wage increases for union employees. The decrease in operating income at our international parks and resorts was due to lower results at Hong Kong Disneyland Resort, partially offset by growth at Shanghai Disney Resort. Lower results at Hong Kong Disneyland Resort were due to decreases in attendance and occupied room nights reflecting the impact of recent events. At Shanghai Disney Resort, higher operating income was driven by an increase in attendance.
Studio Entertainment
Studio Entertainment revenues for the quarter increased from $1.8 billion to $3.8 billion and segment operating income increased from $309 million to $948 million. Higher operating income was due to increases in theatrical and TV/SVOD distribution results at our legacy operations, partially offset by a loss from the consolidation of the TFCF businesses. The increase in theatrical distribution results was due to the performance of Frozen II and Star Wars: The Rise Of Skywalker in the current quarter compared to Ralph Breaks the Internet in the prioryear quarter. The prior-year quarter also included Mary Poppins Returns and The Nutcracker and the Four Realms and the current quarter included Maleficent: Mistress of Evil. Growth in TV/SVOD distribution results was due to sales of content to Disney+, partially offset by a decrease in pay television sales to third parties. Operating results at the TFCF businesses reflected income from TV/SVOD distribution, which was more than offset by a loss from theatrical distribution and general and administrative costs. TFCF theatrical releases in the current quarter included Spies in Disguise, Ford v. Ferrari and Terminator: Dark Fate.
Direct-to-Consumer & International
Direct-to-Consumer & International revenues for the quarter increased from $0.9 billion to $4.0 billion and segment operating loss increased from $136 million to $693 million. The increase in operating loss was due to costs associated with the launch of Disney+, the consolidation of Hulu and a higher loss at ESPN+. These increases were partially offset by a benefit from the inclusion of the TFCF businesses due to income at the international channels including Star. The increase in operating loss at ESPN+ was primarily due to higher programming costs, primarily for Ultimate Fighting Championship (UFC) rights, and an increase in marketing spend, partially offset by subscriber revenue growth and UFC pay-per-view fees. Commencing March 20, 2019, as a result of our acquisition of a controlling interest in Hulu, 100% of Hulu’s revenues and expenses are included in the Direct-to-Consumer & International segment. Prior to March 20, 2019, only the Company’s ownership share of Hulu results was included (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 $102 a stock and its currently trading at $144.73. That's a healthy return of 41.8% 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 and is still a drag on Walt Disney.
The stock of Walt Disney is trading a lot closer to its 52 week high of $153.41 than it is to its 52 week low of $107.32. 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 $153.41 than it is to its 52 week low of $107.32. 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
Disney's direct-to-consumer service launched in November, and has racked up 28.6 million paid subscribers so far, the company said on Tuesday. Disney expects its next wave of subscribers to come from Western Europe and India, where Disney+ is set to debut in March. Disney (DIS) - Get Report shares were roughly flat in after-hours trading.Disney+ ended the quarter with 26.5 million subscribers, beating analysts' estimates of 20 to 25 million, and accumulated an additional 2 million this year thanks to new sign-ups directly on Disney and through various distributors. Disney CEO Bob Iger said he was "comfortable" that Disney+ struck the right balance of library and original content.
"Clearly, the original shows that we decided to invest in, led by the Mandalorian, have worked. And we knew when launched that we were launching with a modest amount of original programming and that it would build over time...[we] don't really feel that there's much that we have to adjust to right now," Iger said.
Read the full article here
Disney's direct-to-consumer service launched in November, and has racked up 28.6 million paid subscribers so far, the company said on Tuesday. Disney expects its next wave of subscribers to come from Western Europe and India, where Disney+ is set to debut in March. Disney (DIS) - Get Report shares were roughly flat in after-hours trading.Disney+ ended the quarter with 26.5 million subscribers, beating analysts' estimates of 20 to 25 million, and accumulated an additional 2 million this year thanks to new sign-ups directly on Disney and through various distributors. Disney CEO Bob Iger said he was "comfortable" that Disney+ struck the right balance of library and original content.
"Clearly, the original shows that we decided to invest in, led by the Mandalorian, have worked. And we knew when launched that we were launching with a modest amount of original programming and that it would build over time...[we] don't really feel that there's much that we have to adjust to right now," Iger said.
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 $140.30 per stock (up slightly from our 4th 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 $140.30. A good entry price into Walt Disney would therefore be at $126.30 or below.
We expect the stock of Walt Disney to trade in a narrow range around our target price (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 $140.30. A good entry price into Walt Disney would therefore be at $126.30 or below.
We expect the stock of Walt Disney to trade in a narrow range around our target price (full value price) in coming weeks and months
Next earnings release of Walt Disney
The Walt Disney Company is expected to release their 2nd quarter 2020 earnings report in early May 2020