Walt Disney Co. (DIS, Financial), one of the largest entertainment companies in the world, reported higher earnings during fiscal second-quarter 2017 compared to past quarters through its strong brand image and revenue-generating product channels.
Brief summary of earnings
Disney reported earnings of $1.50 per diluted share during fiscal second-quarter 2017, outperforming fiscal second-quarter 2016 earnings by 20 cents per share and fiscal first-quarter 2017 earnings by 14 cents per share. Consumers continue identifying with the Disney brand, driving up revenues in several of the company’s business segments: Media Networks, Parks and Resorts and Studio Entertainment.
Despite lower operating incomes, sports broadcasting giant ESPN still led the industry in digital products and mobile broadcasting according to CEO Robert Iger. The sports network reported average monthly customer viewership of 5.2 billion minutes during the quarter as mobile media through the WatchESPN app generated new ways to engage consumers. The strong ESPN brand increased Media Networks revenues by 3% year over year.
Parks and Resorts revenues increased 9%, with segment operating incomes expanding 20% through the opening of Disney’s Shanghai resort during fiscal third-quarter 2016 and continued growth in the U.S. Iger reported Disney Shanghai will welcome its 10 millionth guest by the end of May 2017, increasing the potential for guest spending inside the parks.
The Studio business segment delivered strong performance through “Star Wars: Rogue One” and “Beauty and the Beast,” both films topping box offices in their opening weekend in theaters. The latter film, which grossed $1.146 billion, continues Disney’s trend of making live-action remakes of classics, which include "Maleficent" and "Cinderella." The CEO announced other live-action films, including Mulan, will come out in the next 14 months.
Company offers good growth potential for 2017
Disney’s profitability ranks 8 out of 10, suggesting high growth potential. The company’s margins and returns are near a 10-year high and outperform over 85% of global competitors. While the company’s Piotroski F-score ranks a modest 5 out of 9, Disney has strong Altman Z and Beneish M scores, which suggest low bankruptcy risk in the short term and negligible earnings manipulation.
Disney’s share price rose approximately 0.58% to $112.07. While the stock price is near a 10-year high, the company still offers good growth potential due to its robust brand image.
Two gurus, Ken Fisher (Trades, Portfolio) and Tom Gayner (Trades, Portfolio), increased their position in Disney during the first quarter.
Disclosure: No position in Walt Disney Co.
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