Disney 2016 Q3 Quarterly Update

Just stopping by for another quarterly update in Disney! Another solid quarter from Disney and another decrease in AH trading :frowning:

Disney reported quarterly earnings and revenue that beat analysts’ expectations on Tuesday, amid major announcements including an over-the-top streaming service for DirecTV.

The company posted third-quarter earnings of $1.62 per share on $14.28 billion in revenue. Analysts expected Disney to post earnings of $1.61 per share on $14.15 billion in revenue, according to a Thomson Reuters consensus estimate.

Disney CEO Bob Iger said in a statement that the company’s results “are evidence that our asset mix is strong, as is our ability to execute in ways that enhance the Disney brand and create value for our shareholders while we invest for future growth.”

Read the whole thing at http://www.cnbc.com/2016/08/09/disney-reports-third-quarter-…

Here are the numbers as I have them followed by some thoughts:

Revenue (billions)		Q1		Q2		Q3		Q4
2013				11.341		10.554		11.578		11.568
2014				12.309		11.649		12.466		12.389
2015				13.391		12.461		13.101		13.512	
2016				15.244		12.969		14.277

EPS (Adjusted)			Q1		Q2		Q3		Q4
2013				0.79		0.79		1.03		0.77
2014				1.04		1.11		1.28		0.89
2015				1.27		1.23		1.45		1.20
2016				1.63		1.36		1.62

Free Cash Flow (billions)	Q1		Q2		Q3		Q4
2013				0.559		1.586		2.723		1.748
2014				0.554		1.826		2.047		2.042
2015				0.857		2.011		1.652		2.124
2016				0.956		2.250		2.489

Current (2016 Q3 Earnings):

Revenue Growth (billions)
2015 Q3 TTM Revenue = 51.342
2016 Q3 TTM Revenue = 56.002
Year Over Year Revenue Growth = 9.1%, previous quarter 8.12%,

EPS Growth (adjusted)
2015 Q3 TTM Earnings = 4.84
2016 Q3 TTM Earnings = 5.81
Year Over Year EPS Growth = 20%, previous quarter 20.8%

P/E (Check Current Price) = 96.67/5.81 = 16.64

1YPEG = 16.64/20 = 0.83

Revenue was up in three of the company’s four main segments (significantly so in Studio Entertainment), and slightly down in one:

+2% in Media Networks
+6% in Parks
+40% in Studio Entertainment (Captain America and Finding Dory!)
(1%) in Consumer Products

Operating Income was up in two of the four segments (again led by Studio Entertainment), flat in Media Networks, and down slightly in Consumer Products:

+0% in Media Networks
+8% in Parks
+62% in Studio Entertainment
(7%) in Consumer Products

Media Networks. The revenue growth in Media Networks was from advertising growth at ESPN which was partially offset by higher programming costs at the sports network. Media growth was also slowed by decreases in Disney Channel revenue and less income from A&E.

Parks and Resorts. This segment saw an increase from domestic sales offset by less internationally. Domestic growth was led by higher guest spending and lower costs. Revenues were also down because Easter holiday didn’t fall in this past quarter like it did the previous year. Internationally, Disneyland Paris suffered from lower attendance but Hong Kong Disneyland Resort saw higher guest spending and more guests. Operating income was also lower than it would have been because of higher pre-opening costs at Shanghai Disney.

Studio Entertainment. What more needs to be said? The division saw monster growth from Captain America: Civil War, The Jungle Book, Finding Dory and Alice Through the Looking Glass which were all released this quarter. Zootopia also showed a lingering effect. Home Distribution saw boosts from Star Wars: Force Awakens and Zootopia being released in the quarter.

Consumer Products. Lower results were driven by lower sales of Frozen products from the year ago period, higher marketing costs and foreign exchange rates.

See the full report at https://ditm-twdc-us.storage.googleapis.com/q3-fy16-earnings…

Conclusion: In my mind, Disney just keeps getting cheaper while showing accelerating revenue growth and strong double digit earnings growth. Shares were down about a buck in AH trading. If share prices remain depressed I might add this quarter. JMHO. I realize I’ve been saying Disney has been a buy for about a year while the share price has stagnated. But the PE has also dropped significantly. When I purchased shares last October, the PE was about 23.5, revenue growth was 7%, and EPS growth was 15%. Now the PE is significantly lower but revenue growth and EPS growth are higher.

Some people like to point out that the movies being released today will make for tougher comps a year from now. That is true to an extent. In the year ago quarter, however, Disney released huge movies like Avengers: Age of Ultron, Cinderella, and Inside Out. Over the past decade with meaningful acquisitions including Pixar, Lucasfilms, and Marvel, Disney has positioned themselves to release blockbusters every single quarter, every single year. These properties all have movie franchises that can be used for years and years to come. These movies will drive park attendance, toy purchases, and television shows too.

Major park attractions are being added to in the years to come. Star Wars-themed areas in existing parks are coming to California and Orlando. Ditto with major Pixar-themed attractions. And, of course, Shanghai Disney is just getting started.

All the while bears point to ESPN. But ESPN continues to grow revenues and earnings. Yes, at much slower paces than it used to. And, yes, costs are up. But that hasn’t stopped the sports network juggernaut. It continues to churn out growing profits. Maybe one day the cord cutter wave will slow its growth, but that day has yet to come and I think its obvious that the revenue and earnings at ESPN will never just fall off a cliff. On top of this, ESPN is appearing in skinny bundles and Disney continues to invest in streaming technology. I doubt ESPN is going anywhere soon.

Remember, these are just my opinions and I’m just an average investor with a mediocre track record.

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I have no doubt that Disney will be a great holding when you wake up in 25 years and look back - not sure it can compound at 30% a year ala Saul’s goals, just way too big of a company

What was it that Buffett said? Disney is like an oil company that could put its oil back in the ground and then sell it again later. I think it’s great value if you’re looking very long term and have tempered expectations for the immediate few years


I think it’s great value if you’re looking very long term and have tempered expectations for the immediate few years

Actually I see it the other way around. With the imminent release of Frozen 2 and the last 2 star wars movies together with the long term ageing population and declining birth rates I would think that the opportunity is short term over long term.


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