Disney Earnings Analysis: A Model of All DJIA Earnings Ambitions

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If anyone wants to fault Bob Iger’s role as CEO and chairman of Walt Disney Co. (NYSE: DIS), all they should be pointed to is the Mouse House’s first-quarter earnings report. The company is just firing on all cylinders, and it even brought back profits to its lagging Interactive division. The movie “Frozen” is being touted as the big gain, but there is just so much more to this story than one movie.

Disney blew out its earnings after it reported a profit of $1.11 per share, up from $0.79 per share a year ago. The company also showed revenue growth of 10% to $11.65 billion. Thomson Reuters had estimates of $0.96 per share and $11.24 billion in revenue. And to prove that the expectations were good going into the report, WhisperNumber.com had sent us a whisper number of $1.00 per share.

WhisperNumber.com also showed that Disney has a 71% positive surprise history. Well, this fit into that 71%, and then some. About all we could find as a problem for shareholders was that Disney’s effective income tax rate was 35.2%, versus 28.8% a year ago.

Free cash flow from operations was up $195 million to $2.38 billion for the quarter. The real success stands out in a unit-by-unit review. Disney just shined on all fronts here:

  • Media Networks rose 4% to $5.134 billion, and operating income rose 15% to $2.133 billion.
  • Parks and Resorts rose 8% to $3.562 billion, and operating income rose 19% to $457 million.
  • Studio Entertainment rose by 35% to $1.800 billion, with operating income up over 100% to $475 million.
  • Consumer Products rose 16% to $885 million, and operating income rose 37% to $274 million.

We previously said that Disney’s Interactive unit is back to profits. This struggling unit has been a serial disappointment for Disney, but the unit’s revenue rose by 38% to $268 million. Disney’s Interactive unit even posted a positive result of $14 million in the quarter for operating income.

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The only thing holding Disney back right now is that the stock was already up handily. Disney shares were up 6% year-to-date going into earnings, while the DJIA was moderately in the red for the year. The Wednesday earnings reaction was up by only 0.65% at $81.60, against a 52-week range of $60.41 to $83.65.

A fresh note from Sterne Agee shows that Disney was maintained as Neutral, but the price target was raised to $88 from $74. That implies another 10% upside.

This is the type of Dow earnings report you would want to see from most DJIA components in a bull market. It is more than fair to say that Disney’s earnings were far better than most DJIA reports seen for the first quarter. All of this is still without any new Star Wars boost as well.

So, again, if anyone wants to bother Bob Iger right now, they better look at Disney’s earnings report before they do.