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Category: Stock Market and Walt Disney
Date: 6 May 2020 Stock Price: $101.06 We take a look at entertainment giant Walt Disney's financial results for the 2nd 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? Adn has the lockdown and social distancing measures to curb the spread of coronavirus assisted in getting more people to use their streaming service.
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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 2nd quarter 2020 earnings report
The data below refers to the latest quarter unless specified otherwise
- Revenues: $18.009 billion (up from $14.992 billion for the same quarter of the previous year)
- Revenue increased by 20.1% over the last 12 months
- Total costs and expenses: $16.639 billion (up from $11.534 billion for the same quarter of the previous year)
- Total cost and expenses increased by 44.3% 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): $460 million (down from $5.452 billion for the same quarter of the previous year)
- Diluted earnings per share: $0.25 (down from $ 3.55 for the same quarter of the previous year)
- PE ratio of Walt Disney : 99
- Diluted number of shares in issue: 1.816 billion (up from 1.537 billion for the same quarter of the previous year)
- Cash and cash equivalents: $14.339 billion
- Cash and equivalents per share: $7.89
- Cash and cash equivalents makes up 7.8% of Walt Disney's market capital
- Cash and cash equivalents makes up 6.9% of Walt Disney's total assets
- Receivables of Walt Disney: $14.532 billion
- Receivables makes up 7.1% of Walt Disney's total assets
- Goodwill of Walt Disney: $80.320 billion
- Goodwill per share: $44.23
- Goodwill makes up 38.9% of Walt Disney's total assets
- Cash generated from operation: $4.787 billion
- Cash generated from operations per share: $2.63
The Walt Disney Company management commentary on their 2nd quarter 2020 earnings
BURBANK, Calif. – The Walt Disney Company today reported earnings for its second fiscal quarter ended March 28, 2020. Diluted earnings per share (EPS) from continuing operations for the quarter decreased 93% to $0.26 from $3.53 in the prior-year quarter. Excluding certain items affecting comparability(1), diluted EPS for the quarter decreased 63% to $0.60 from $1.61 in the prior-year quarter. EPS from continuing operations for the six months ended March 28, 2020 decreased 73% to $1.44 from $5.42 in the prior-year period. Excluding certain items affecting comparability (1) , EPS for the six months decreased 38% to $2.14 from $3.45 in the prior-year period. Results in the quarter and six months ended March 28, 2020 were adversely impacted by the novel coronavirus (“COVID-19”) pandemic.
“While the COVID-19 pandemic has had an appreciable financial impact on a number of our businesses, we are confident in our ability to withstand this disruption and emerge from it in a strong position,” said Bob Chapek, Chief Executive Officer, The Walt Disney Company. “Disney has repeatedly shown that it is exceptionally resilient, bolstered by the quality of our storytelling and the strong affinity consumers have for our brands, which is evident in the extraordinary response to Disney+ since its launch last November.” Results for the current quarter and six months reflect the consolidation of TFCF Corporation (TFCF) and Hulu LLC (Hulu), which the Company started consolidating on March 20, 2019.
The impact of COVID-19 and measures to prevent its spread are affecting our segments in a number of ways, most significantly at Parks, Experiences and Products where we have closed our theme parks and retail stores, suspended cruise ship sailings and guided tours and experienced supply chain disruptions. In addition, we have delayed, or in some cases, shortened or cancelled theatrical releases and suspended stage play performances at Studio Entertainment and have seen advertising sales impacts at Media Networks and Direct-to-Consumer & International. We have experienced disruptions in the production and availability of content, including the cancellation or deferral of certain sports events and suspension of production of most film and television content. Many of these businesses have been closed consistent with government mandates or guidance. We estimate the COVID-19 impact on operating income at our Parks, Experiences and Products segment was approximately $1.0 billion primarily due to revenue lost as a result of the closures. In total, we estimate that the COVID-19 impacts on our current quarter income from continuing operations before income taxes across all of our businesses was as much as $1.4 billion, inclusive of the impact at the Parks, Experiences and Products segment. Impacts at our other segments include lower advertising revenue at Media Networks and Direct-to-Consumer & International driven by a decrease in viewership in the current quarter reflecting COVID-19’s impact on live sports events and higher bad debt expense and a loss of revenue at Studio Entertainment due to theater and stage play closures
The impact of COVID-19 and measures to prevent its spread are affecting our segments in a number of ways, most significantly at Parks, Experiences and Products where we have closed our theme parks and retail stores, suspended cruise ship sailings and guided tours and experienced supply chain disruptions. In addition, we have delayed, or in some cases, shortened or cancelled theatrical releases and suspended stage play performances at Studio Entertainment and have seen advertising sales impacts at Media Networks and Direct-to-Consumer & International. We have experienced disruptions in the production and availability of content, including the cancellation or deferral of certain sports events and suspension of production of most film and television content. Many of these businesses have been closed consistent with government mandates or guidance. We estimate the COVID-19 impact on operating income at our Parks, Experiences and Products segment was approximately $1.0 billion primarily due to revenue lost as a result of the closures. In total, we estimate that the COVID-19 impacts on our current quarter income from continuing operations before income taxes across all of our businesses was as much as $1.4 billion, inclusive of the impact at the Parks, Experiences and Products segment. Impacts at our other segments include lower advertising revenue at Media Networks and Direct-to-Consumer & International driven by a decrease in viewership in the current quarter reflecting COVID-19’s impact on live sports events and higher bad debt expense and a loss of revenue at Studio Entertainment due to theater and stage play closures
The Walt Disney Company (NYSE: DIS) stock price history
The image below obtained from Google shows The Walt Disney Company's share price for the last 5 years. And its been a pretty bad time for Walt Disney stockholders. 5 years ago Walt Disney was trading at $110 a stock and its currently trading at $101.06. That's a loss of -8.5% provided to Walt Disney Stockholders over the last 5 years. The coronavirus pandemic and its impact on the various Disney theme parks across the world has hit the group's earnings and as can be seen from the image below, its stock price.
The stock of Walt Disney is trading a lot closer to its 52 week low of $79.07 than it is to its 52 week high of $153.41. This to us is a clear indication that the short term momentum and sentiment towards Walt Disney stock is very very negative.
The stock of Walt Disney is trading a lot closer to its 52 week low of $79.07 than it is to its 52 week high of $153.41. This to us is a clear indication that the short term momentum and sentiment towards Walt Disney stock is very very negative.
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) shares were indicated lower in pre-market trading Wednesday after the entertainment giant suspended its semi-annual dividend following a $1.4 billion hit to second quarter profits that overshadowed impressive subscriber gains for its Disney+ streaming service. Disney said it will take 'phased' approached to theme park re-openings, with some sites in Asia up-and-running by the spring, after noting the division was responsible for around $1 billion of the second quarter profit decline.
Adjusted earnings for the three months ending in March, the group's fiscal second quarter, fell 63% to 60 cents per share, missing Street forecasts, even as revenues jumped 20.6% to a stronger-than-expected $18 billion as media networks sales offset the theme park slump. Disney said scrapping its semi-annual dividend, which was payable in July, will save the company $1.6 billion, a move that will augment a $900 million reduction in 2020 capital spending plans. It also declined to provide financial guidance for the remainder of the year.
Read the full article here
Walt Disney Co. (DIS) shares were indicated lower in pre-market trading Wednesday after the entertainment giant suspended its semi-annual dividend following a $1.4 billion hit to second quarter profits that overshadowed impressive subscriber gains for its Disney+ streaming service. Disney said it will take 'phased' approached to theme park re-openings, with some sites in Asia up-and-running by the spring, after noting the division was responsible for around $1 billion of the second quarter profit decline.
Adjusted earnings for the three months ending in March, the group's fiscal second quarter, fell 63% to 60 cents per share, missing Street forecasts, even as revenues jumped 20.6% to a stronger-than-expected $18 billion as media networks sales offset the theme park slump. Disney said scrapping its semi-annual dividend, which was payable in July, will save the company $1.6 billion, a move that will augment a $900 million reduction in 2020 capital spending plans. It also declined to provide financial guidance for the remainder of the year.
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 $143.20 per stock (up slightly from our 1st quarter 2020 earnings report valuation of Walt Disney).
We therefore believe that the stock of Walt Disney's is close to being undervalued. 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 $143.20. A good entry price into Walt Disney would therefore be at $128.90 or below.
We expect the stock of Walt Disney to kick up in coming weeks and months to levels closer to 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 undervalued. 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 $143.20. A good entry price into Walt Disney would therefore be at $128.90 or below.
We expect the stock of Walt Disney to kick up in coming weeks and months to levels closer to 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 3rd quarter 2020 earnings report in early August 2020