Walt Disney Co. (DIS, Financial) ended 2016 on a flat note as the stock was down 0.82%. It is off to a positive start this year, however, and is up almost 4% year to date. The company ended fiscal 2016 with revenue surging approximately 6% to almost $56 billion. Moreover, 2016 represented the sixth successive year in which the company produced record results.
The company has been facing some challenges recently. Disney's problems began in mid-2015 with concerns that cord-cutting was affecting the profitability of its cable network business. The company’s ESPN business displayed 2% growth and its operating income remained flat from the same period the year before.
To overcome this issue, management is positioning the company so that ESPN and its other content will continue to grow regardless of consumers' media viewing habits. The company is getting some of its content incorporated in several distributors’ bundles as well.
Moreover, Disney purchased a 33% stake in video streaming frontrunner BAMTech, which will enable it to offer its content directly to viewers.
Fortunately, the decline of its cable network is the company's only major concern. Disney's other segments posted healthy growth. Studio segment revenue surged 28% while its operating income climbed 37%.
In regard to theme parks and resorts, the company's main focus in 2016 was the opening of Shanghai Disney. The company invested $5.5 billion into the park. Moving ahead, Disney revealed the park welcomed four million guests in its first four months of operation, surpassing expectations.
The company produced $13.2 billion of operating cash flow in 2016, a 21% increase from the previous year. This cash will allow Disney flexibility in making vital investments to enlarge its prevailing businesses, take advantage of new growth opportunities and return wealth to shareholders.
Summing up
Although Disney ended 2016 on a flat note, it does not mean the stock’s downturn has begun. Despite ongoing issues with its ESPN platform, the company has managed to hit new 52-week highs and is working to overcome these problems. As an outcome, investors should continue holding the stock for loftier gains in the coming years.
Disclosure: No position in the stocks mentioned in this article.
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