Disney Quarterly Update: 2016 Q2 Edition

Back with your quarterly Disney update. Though Disney barely missed analyst expectations on adjusted EPS, I like the numbers:

Walt Disney Co. said its earnings rose 1.7% in the latest quarter as the media conglomerate benefited from the continued popularity of “Star Wars: The Force Awakens” and a strong performance by the animated animal comedy “Zootopia.”

However, shares of the Burbank, Calif., company fell 5.9% to $100.20 in recent after-hours trading as per-share earnings, excluding certain one-time items, and revenue missed expectations. Through Tuesday’s close, the stock has risen roughly 20% over the past three months.

Investors have remained focused on subscriber trends at the company’s ESPN sports network and the effect of “cord-cutting” and “skinny bundles” on Disney’s television business.

From http://www.msn.com/en-us/money/companies/disney-results-boos…

Yes, it missed analyst expectations but I just can’t help loving this set of numbers:

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

Flat in Media Networks
+4% in Parks
+22% in Studio Entertainment (Zootopia and Star Wars!)
(2)% in Consumer Products (Infinity was down and residual sales in Frozen toys finally tapered off)

Operating Income was up in three of the four segments:
+9% in Media Networks
+10% in Parks
+27% in Studio Entertainment
(8)% in Consumer Products

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

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

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

Current (2016 Q2 Earnings):

Revenue Growth (billions)
2015 Q1 TTM Revenue = 50.707
2016 Q1 TTM Revenue = 54.826
Year Over Year Revenue Growth = 8.12%, previous quarter’s Rev Growth = 8.85%

Adjusted EPS Growth
2015 Q1 TTM Earnings = 4.67
2016 Q1 TTM Earnings = 5.64
Year Over Year EPS Growth = 20.77%, previous Q EPS Growth = 21.1%

P/E (Check Current Price) = 101.59/5.64 = 18.012

1YPEG = 18.012/20.77 = 0.87

Conclusion: Not as cheap as Disney stock was last quarter, but given the market’s AH reaction to missing analyst EPS expectations by $0.04, we might see a fire sale again soon. Meanwhile, both revenue and earnings growth continue at the same healthy clip for a media giant.

Because media entertainment is their largest business segment, everyone remains focused on ESPN expenses and the possible threat of cord cutters.

Sure studio entertainment was up because of residual Star Wars tickets, but that was not a one-time event. Five more Star Wars movies are planned in the coming years and you can be sure more will be coming after that. Zootopia was a huge hit, netting almost a billion dollars in sales worldwide. This quarter The Jungle Book and Captain America Civil War movies are already huge hits. Popular Pixar franchises, like the sequel to Finding Nemo, are coming next quarter. This not only drives sales in movie tickets but will continue to drive park attendance and merchandise sales for years to come.

These are just my humble thoughts. Please remember I am just an average investor with a mediocre track record.

Long DIS
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Disney keep producing mega hits but it staggers me that the largest movie of all time with several other mega hits concurrently leaves them with a low single digit growth in revenues and earnings. If Star Wars wasn’t there I’m not sure how much growth there would be at all. A great defensive play with huge brand equity in its franchises but not exactly a cheap high growth stock.