ii view: Walt Disney disappoints

by Keith Bowman from interactive investor |

Disney shares fall as media streaming launch costs impact.

Third-quarter results 

  • Revenue up 33% to $20.2 billion
  • Segment operating income down 5% to 3.96 billion
  • Adjusted earnings per share down 28% to $1.35

Chief executive Robert A. Iger said:

“Our third-quarter results reflect our efforts to effectively integrate the 21st Century Fox assets to enhance and advance our strategic transformation. I’d like to congratulate The Walt Disney Studios for reaching $8 billion at the global box office so far this year--a new industry record--thanks to the stellar performance of our Marvel, Pixar and Disney films. The incredible popularity of Disney’s brands and franchises positions us well as we launch Disney+, and the addition of original and library content from Fox will only further strengthen our direct-to-consumer offerings.”

ii round-up:

The Walt Disney Co (NYSE:DIS) is made up of four divisions. Media Networks which includes its cable and broadcast television networks, Parks, Experiences and Products, Studio Entertainment, including brands such as Pixar, Marvel and Lucasfilm, and Direct-to-Consumer and International which houses its overseas businesses and streaming services. 

Media Networks is the biggest division, accounting for around two-fifths of group revenues, with the US and Canada by far its biggest geographical region generating approximately three-quarters of total sales. 

The company reported results which missed analyst forecasts, made complicated by the acquisition of assets from 21st Century Fox. 

A move to launch a streaming service to compete with Netflix saw its Direct-to-Consumer and International division delivering a loss of $553 million. Park attendance had also fallen, possibly as consumers delayed their visits ahead of new Star Wars attractions. As a result, earnings per share of $1.35 were significantly below the average analyst forecast of $1.75.

The share price fell by over 6% in after-hours US stock market trading. 

ii view:

The Disney brand is ironic and recognised globally. The previous acquisition of Lucas Films and the Star Wars franchise further elevated its brand portfolio, resulting in the launch of Star Wars land at its part resorts. 

But the acquisition of further content from Fox and the November launch of a streaming service, Disney+, to rival Netflix Inc (NASDAQ:NFLX), is what currently excites investors. A strong content bank is expected to appeal to consumers. Although with the share price still up over 20% year-to-date and the forward price earnings ratio currently sat at a premium to the ten-year average, hopes for the new service appear to be running high. 

Positives: 

Strong brands and media content bank

Launching a streaming service

Negatives:

Apple Inc (NASDAQ:AAPL) is also launching a streaming service

Consumer leisure spend is cyclical and vulnerable to economic downturns

The average rating of stock market analysts:

Strong buy

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Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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