Disney 2017 Q2 Update

From the quarterly earnings release:

he Walt Disney Company (NYSE:DIS) today reported quarterly earnings for its second fiscal quarter ended April 1, 2017. Diluted earnings per share (EPS) for the quarter increased 15% to $1.50 from $1.30 in the prior-year quarter. Excluding certain items affecting comparability(1), EPS for the quarter increased 10% to $1.50 from $1.36 in the prior-year quarter. EPS for the six months ended April 1, 2017 increased to $3.05 from $3.04 in the prior-year period. Excluding certain items affecting comparability(1), EPS for the six months increased 2%.

“Disney delivered another quarter of double-digit EPS growth, driven by the strong performance of our Studio and Parks and Resorts,” said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company. “Our continued strong performance is a direct result of our proven strategic focus on great branded content, innovative technology and global growth. We’re pleased with our results in Q2 and remain confident in our ability to continue to deliver significant shareholder value over the long term.”

From https://thewaltdisneycompany.com/walt-disney-company-reports…

Shares are currently down a little more than 2% in AH trading. Shortly after the market closed, Iger gave an interview on CNBC:

Disney’s cable business, which falls under its media and networks segment, reported operating income of $1.79 billion. That figure comes in below Street expectations for about $1.85 billion, according to a StreetAccount consensus estimate.

The company said the 3 percent year-over-year decrease in operating income was primarily driven by ESPN’s higher programming costs. Disney said, however, that the decline was “partially offset by affiliate and advertising revenue growth.”

Disney Chairman and CEO Bob Iger again defended the sports network, saying the company is “confident in ESPN’s future.”

“Live sports is still a huge driver of consumption,” Iger said on CNBC’s “Closing Bell.”

Read more at http://www.cnbc.com/2017/05/09/disney-earnings-q2-2017.html

Here’s a look at the numbers:

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		13.142
2017				14.784		13.336

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		1.10
2017				1.55		1.50

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				1.050		2.379		2.489		2.745
2017				0.220		2.555

2017 Q2 Earnings (Current):

Revenue Growth (billions)
2016 Q2 TTM Revenue = 54.826
2017 Q2 TTM Revenue = 55.539
YOY TTM Revenue Growth =1.3%, previous quarter 1.6%

EPS Growth (adjusted)
2016 Q2 TTM EPS = 5.64
2017 Q2 TTM EPS = 5.77
YOY TTM EPS Growth = 2.3%, previous quarter 2.2%

P/E (Check Current Price) = 112.07/5.77 = 19.42

Revenue was down in two of the company’s four main segments, increasing in Parks and Resorts and Media Networks categories:

Media networks: $5.95B, +3% YOY
Parks and Resorts: $4.3B, +9% YOY
Studio Entertainment: $2.03B, (1%) YOY
Consumer Products: $1.06B, (11%) YOY

Operating income was up in three of four segments, including over 20% increases in Parks and Studio Entertainment:

Media networks: $2.22B, (3%) YOY
Parks and Resorts: $750M, +20% YOY
Studio Entertainment: $656M, +21% YOY
Consumer Products: $367M, +3% YOY

Conclusion: Disney turned in a quarter of two companies. Parks and Resorts continues to flourish. Ditto with Studio Entertainment. Consumer Products isn’t making a killing but it is a nice complement to the parks and movies. These three segments fit well together and drive a virtuous cycle for Disney. Disney churns out big movie blockbusters. These movies drive attendance to parks and sales of toys/merchandising tied in to the movies. Wait 2-3 years, make sequel, repeat cycle.

So what doesn’t belong? That question is easy to answer: ESPN. Now, I am NOT advocating Disney spin off ESPN, but I understand the reasoning behind it. It is facing a changing industry and rising costs and increased competition. That’s a potent combination of headwinds. Do I think ESPN is going to figure all this out? Yeah, I do. In fact, with Disney’s acquisition of BAMTech last year, I 'm fairly certain it will. But I think the transition is going to be a bumpy ride. And I’m beginning to wonder if CEO Iger wants Disney to ride that transition out or if he wants to spin off or sell ESPN before he leaves. He’s going to retire soon an I wonder if he extended his own contract to give him enough time to pull this off.

With or without ESPN, I am fine holding Disney here. I just wonder though if Disney is thinking of getting rid of it. Just pure, baseless speculation on my part :slight_smile:

Long DIS
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See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx


Disney a possible acquisition target for Apple?

See bullet #3 in link below:

Citi sets odds on Apple’s M&A target