Walt Disney Co. (DIS, Financial) was almost flat in 2016, but the stock is off to a decent start in 2017. The company’s feeble performance in the prior year was mainly due to the escalating concerns regarding its most significant platform, ESPN.
Recently, the House of Mouse reported its first-quarter results. In first-quarter 2017, the company reported earnings per share of $1.55, exceeding the analyst estimate by 5 cents. On the other hand, the company’s revenue came in at $14.78 billion, missing the consensus by $480 million.
Regardless of Hurricane Matthew as well as a shift in the New Year’s holiday, the revenue generated from the company’s Parks and Resorts segment surged 6% together with operating income growth of 13%. In June 2016, the company inaugurated its $5.5 billion theme park in Shanghai which accounts for the first theme park in mainland China and the second in China.
The company detailed that the Shanghai Disneyland performed much better than expectations as it became extremely popular with guests celebrating the Chinese New Year. On the other hand, domestic attendance went down 5% due to several factors, but that drop was equipoised by greater average guest spend.
Disney continues to improve its theme parks by adding new things from time to time. After a 10-month delay, the company finally introduced the Rivers of Light nighttime show at its Animal Kingdom Park in February. Moreover, the company is also on its way to inaugurating "Pandora – The World of Avatar," the resort’s largest theme park expansion since 2012.
Moving toward the media segment, Disney looks aware of the fact that the consumption of media continues to change. Therefore, the company is making several smart moves to overcome the issues faced by its most significant platform, ESPN.
The House of Mouse recently signed a deal with Hulu for live TV streaming, which will comprise ESPN live as well as several other features. Most significantly, the company also purchased a 33% stake in BAMTech in an effort to lure online viewers and accelerate growth in direct-to-consumer video streaming. As a result, BAMTech will help ESPN introduce direct-to-customer, subscription streaming service including live sporting events.
Summing up
Disney has a diversified revenue stream which is a great plus for the company going forward. Among all the segments, the House of Mouse’s theme park and studio entertainment segments have been performing amazingly well over the last few years. After breaking box office records in 2016, the company has a strong slate of movies this year as well.
On the other side, the company is taking various steps to overcome the issues faced by its media network segment, and it looks like the company’s hard efforts will reap fruitful results in the imminent years. Furthermore, the stock also yields a healthy forward dividend yield of 1.41 percent and currently trades at a price-earnings (P/E) ratio of 20, which makes it a great long-term pick for shareholders.
Disclosure: No position in the stock mentioned in this article.
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