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Alberto Abaterusso
Alberto Abaterusso
Articles (2073) 

Disney Rises on 4th-Quarter Earnings Beat

Lower income from ongoing operations and increased expenditures impinge on free cash flow

November 08, 2019 | About:

The Walt Disney Co.’s (NYSE:DIS) share price increased 5.29% (or $7.04) to $140.00 in extended trading on Thursday after the entertainer topped analyst ecpectations on fourth-quarter pro forma earnings and revenue for fiscal year 2019.

Walt Disney posted pro forma earnings per diluted share of $1.07 (down 28% year over year), topping analyst expectations by 10 cents, on $19.1 billion in revenue (up 33.5% year over year). Fourth-quarter revenue topped projections by $80 million.

The US-based entertainer manages its business through four main segments, which reported the following changes from the year-ago quarter. Media Networks’ revenue of $6.51 billion marked a 22% increase; Parks, Experiences and Products’ revenue of $6.66 billion marked a 8% increase; Studio Entertainment’s revenue of $3.31 billion marked a 52% increase; and Direct-to-Consumer and International’s revenue of $3.43 billion marked a 316% increase.

“Our solid results in the fourth quarter reflect the ongoing strength of our brands and businesses,” Chairman and CEO Robert A. Iger commented. “We’ve spent the last few years completely transforming The Walt Disney Company to focus the resources and immense creativity across the entire company on delivering an extraordinary direct-to-consumer experience, and we’re excited for the launch of Disney+ on November 12.”

Furthermore, total segment operating income increased by 5% to $3.44 billion thanks to higher sales reported in Disney Vacation Club and merchandise licensing as well as higher guest spending reported by Disneyland Resort. In contrast, the net income from ongoing operations of $785 million declined 66% and cash flows from ongoing operations of $1.72 billion declined 55%. Walt Disney saw a sharp deterioration in the fourth quarter free cash flow of $409 million, down 85% from the prior year.

Walt Disney also posted figures for the entire year of fiscal 2019. Full year revenues were $69.57 billion in 2019 compared to $59.43 billion in 2018, a 17% gain. Regardless of revenue growth, total segment operating income decreased 5% to $14.87 billion and pro forma earnings per diluted share dropped 19% to $5.77.

The yearly cash flow statement also reported a lower operating cash flow of $5.98 billion, a 58% slump, and a lower free cash flow of $1.11 billion, an 89% slump. The decrease resulted from the sustainment of tax obligations related to the spin-off of Fox Corporation following Disney's acquisition of 21st Century Fox, a lower operating profit, a higher financial cost and increased spending for social contributions and film/TV production.

As of Sept. 28, 2019, the balance sheet of the Walt Disney Company had $5.42 billion in cash on hand and equivalents, $22.8 billion in film and television costs, $58.59 billion in attractions, buildings and equipment and $23.22 billion in intangible assets. Total debt was nearly $47 billion and total equity was worth $93.89 billion.

Year to date, the share price of Walt Disney has risen 21% to around $132.96 at close on Thursday for a market capitalization of $239.51 billion. The share price is below the 120- and 70-day simple moving average lines, but above the 30-day SMA line.

Over the past year, the stock price has risen 13%. The 52-week range is $100.35 to $147.15.

The company pays quarterly dividends. On July 25, The Walt Disney Company sent an 88 cents cash payment per common share out to its shareholders, producing a 1.34% forward dividend yield (1.33% trailing 12-month dividend yield), based on Thursday’s closing share price.

Wall Street analysts have issued buy recommendations for the company on price targets averaging $154.18 per share, an almost 16% upside from Thursday's closing market price.

Disclosure: I have no positions in any securities mentioned.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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