Media conglomerate The Walt Disney Company (DIS - Free Disney Stock Report) issued fiscal fourth-quarter and full-year results (year ended September 29, 2018) after yesterday's closing bell. Investors didn't react that strongly to the news, and the stock is currently up modestly higher in pre-market action.
The company closed the year on a strong note. Revenues came in at $14.3 billion and $59.4 billion for the September quarter and full year, representing respective year-over-year increases of 12% and 8%. (The top line surpassed our estimates by about $560 million.) Share earnings jumped 38% and 47%, to $1.55 and $8.36, for the period and fiscal 2018, respectively. The bottom-line showing outpaced our estimates by $0.49 a share.
Overall, a lower effect tax rate, higher operating income at most of its business segments, gains from the disposition of real estate, and a reduced share count boosted full-year results.
Once again, Parks & Resorts and Studio Entertainment registered the strongest gains. Revenues at Disney's vacation destinations grew 10%, and profits were up 18% for the full year. Meanwhile, its movie business saw revenues jump 19%, and income advanced 27%. These performances offset sluggishness at Media Networks and Consumer Products/Interactive Media segments.
Disney has been focusing on completing the acquisition of the bulk of Twenty-First Century Fox (FOXA), and setting the stage for the integration of those new assets. The proposed combination received necessary regulatory approvals from the European Union earlier this week, and now awaits other closing conditions. All told, the $71.3 billion tie-up could close by early 2019. We believe the combination would lead to significant cost synergies, and the Fox media and brands will complement Disney's content library nicely.
Meantime, management is developing its global direct-to-consumer strategy. It plans to launch the Disney-branded steaming service, which will be named Disney+, late next year. The new platform will feature exclusive content, like a new Marvel series and an animated StarWars spin off. Overall, we figure this initiative will enable Disney to compete with streaming media services like Netflix (NFLX) and Amazon(AMZN) Prime Video. The company rolled out subscription service ESPN+ earlier this year, which has been gaining subscribers over the past few months. What's more, the potential addition of Fox's technology and network and film content should bolster its streaming platform.
We have raised our fiscal 2019 estimates, tacking on $300 million to the top line, to $60.6 billion, and $1.10 a share to our bottom line, bringing our call to $8.50. That said, we expect growth will moderate next year, and, as such, these new figures represent a mere 2% gain over the stellar fiscal 2018 showing. Likewise, as per Value Line convention, our earnings estimates do not reflect the impact of potential acquisitions.
Disney shares have had a good run over the past few years. And, generally speaking, we look for the House of Mouse to continue to gain steam moving forward. However, the multiyear run-up in price has discounted a good deal of this issue's 3- to 5-year appreciation potential. That said, those investors with a conservative bent may find a lot to like in the blue-chip stock. Disney shares maintain our Highest rank (1) for Safety and garner an excellent score for Price Stability. Too, the entertainment giant's financials are very strong, as reflected by our top rating for Financial Strength (A++).
About The Company: The Walt Disney Company operates Media Networks such as ABC and ESPN, and Studio Entertainment. Its world famous parks and resorts include Disneyland, Walt Disney World (Magic Kingdom, Epcot, and Disney’s Hollywood Studios), while the company earns royalties from Tokyo Disneyland and manages Disneyland Resort Paris and Hong Kong Disneyland. It also operates a cruise line and Consumer Products and Interactive Media segments. ABC was acquired in February, 1996; Pixar in May, 2006; and Marvel in December, 2009.
- Orly Seidman
