The Walt Disney Company [DIS] announced its earnings from its fourth fiscal quarter on Thursday. The company with a market cap of $172.52bn performed above Wall Street expectations, reporting earnings and revenue above forecasts. 

Disney reported revenues of $14.31bn compared with $13.73bn forecast by analysts. Shares rose by $2 to $118.12 in pre-market trading after the earnings report, and are now up 3.76% since 1 January.

In the previous quarter, Disney missed market expectations: its per-share earnings of $1.87 in Q3 came in below analysts’ predictions of $1.95, and revenue of $15.2bn was short of Wall Street’s forecast of $15.34bn. This time round revenue of $1.48 per share beat expectations, although it is down on the previous quarter.

 

Revenue percentage change, fiscal Q4 YoY+12%
Earnings per share (EPS) percentage change, fiscal Q4 YoY+38%
Performance YTD9.6%
Market cap$173.8bn
PE Ratio (TTM)14.75

Disney stock vitals, Yahoo finance, as at 14 November 2018

 

Over the course of a year, Disney’s stock has increased gradually by 13%, thanks in part to a new ESPN-branded streaming service and the Fox asset acquisitions. The company is outperforming the S&P 500, which is up 8.60% since November 2017. 

Disney stocks have generally been on an upward trend since June, when it was around the $99 mark.Disney share price performance, NASDAQ interactive chart, as at 14 November 2018

 

Disney’s streaming plans excite investors

Disney intends to roll out Disney+, its answer to Netflix [NFLX] in late 2019. Disney will integrate assets recently acquired by 21st Century Fox into the platform, expanding the company’s array of content on the service, which is intended to ultimately rival market leaders Netflix and Amazon [AMZN]

However, it’s not clear whether or not the company will be able to get the technology right to truly upset the status quo; Netflix has a presence in every market in the world with 137 million users worldwide, and spends unprecedented figures on content. 

 

Films and TV drive growth

The company’s film wing – which is by nature the most volatile based on movie releases and box-office success – smashed its projected revenues of $1.82bn, which in itself was a 27.5% increase year-on-year. The studio made $2.15bn in Q4 for the company, which meant quarterly revenue grew 50% year-on-year, with the films Black Panther, Star Wars: The Last Jedi, Avengers: Infinity War and Incredibles 2 all enjoying huge commercial success. 

The powerhouse’s media segment also performed well; Disney owns ESPN, ABC and Freeform among others, and revenues were projected to climb 4% from $5.47bn in the fourth quarter of 2017 to touch $5.7bn in 2018. The reality was a booming revenue of $5.96bn.

Disney’s parks and resorts – particularly the international sites – almost met expectations, reaching $5.07bn compared to a forecasted $5.08bn. Last year the segment led to a revenue increase of 6% to $4.7bn, and an operating income of $746m, though Hurricane Irma hurt both slightly. Disneyland Paris and Shanghai Disney Resort were the most commensurate to growth.

$5.96bn

Disney's media segment's fiscal Q4 revenue, 2018

 

Is there opportunity in Disney’s share price? 

Disney has also doubled its stake in popular US streaming service Hulu with the Fox assets acquisition. Through the purchase Disney now has the rights to valuable intellectual property, as well as a greater pool of talent, particularly in television.

Disney could represent a cheaper way to take part in the growth of streaming, a market that is set to reach $82bn by 2023 – the stock trades at a price-earnings ratio of 15.03, relatively cheap when compared to Netflix, its ratio coming in at 109.94.

However moving forward it’s less clear if Disney will be able to match the levels of market saturation of the likes of Netflix. “Disney finds itself in a difficult position: moving aggressively into streaming could accelerate losses in its cable networks, but failing to do so could result in competitors – like Netflix – building an insurmountable lead,” commented Motley Fool’s Joe Tenebruso.

But it’s worth not forgetting that media isn’t Disney’s only hand – it plans to open ‘Star Wars Land’ in 2019, at both Disneyland and Walt Disney World locations across the world. Given its consistent role within the company’s profit portfolio, parks may well play a long-term role in growth. In the first nine months of fiscal 2018, the segment’s revenues grew by 11% year-on-year and operating income increased by 20%.