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Disney's Solid Quarter

Posted: Nov 17, 2009 09:38 AM by Greg Sushinsky

Tickers in this Article: GOOG, MVL, CBS, VIA, TWX, NWS, DIS

Walt Disney Co. (NYSE: DIS) reported diluted fourth-quarter earnings of 47 cents a share compared to diluted earnings of 40 cents per share in last year's fourth quarter. Net income rose to $895 million from $760 million on revenue of $9.87 billion versus $9.45 billion in the year ago quarter. Strong performance, especially in Disney's cable television division, which features ESPN, led the way. Disney's numbers handily beat the estimates. (To learn more about earnings, see Strategies For Quarterly Earnings Season).

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Disney's Year
Disney also reported its full-year earnings. The company turned in $1.76 diluted earnings per share for the fiscal year versus $2.28 last year. Revenues were down slightly to $36.1 billion compared to $37.8 billion last year. The fiscal year performance was hurt overall by the bad economy, which ground down results of most media companies, even chipping away at some usually strong Disney segments.

Inside the Mouse Palace
Disney's strong showing in cable brought in a surge in ad revenue, though in the parks and resorts area, operating revenue fell 17%. Disney movie studios, whose chief Dick Cook left in September, are admittedly a concern, with revenues off by 16% for the year and the division posting five consecutive losing quarters. But overall, Disney turned in a solid performance, as it did better than competitors News Corp (NYSE: NWS), Viacom (NYSE: VIA) and Time Warner (NYSE: TWX), all of which posted recent revenue declines. CBS (NYSE: CBS), a broadcasting competitor, did post ad price increases recently, showing that at least the downward trend in broadcast advertising may be ending.

Media's Difficult Times Not Necessarily Over
Though Disney had its fiscal-year pain like the rest of the media giants, the company is showing less strain than some of the others. Rupert Murdoch continues his quixotic, or maybe just bad, management of News Corp, given his latest bizarre fight with Google (Nasdaq GOOG). Murdoch wants his content removed, even from search, or else be paid for it. AOL, a millstone around Time Warner's corporate neck, has been cutting jobs in advance of the spinoff of the unit, which seems to be taking forever. Doesn't Time Warner wish it had never heard of AOL? Viacom, run by Sumner Redstone, whose management style can at times be confused with that of Murdoch's at News Corp, has at least been mentioned as a stock worth looking at on the basis of a favorable price-to-cash flow ratio. All of these companies are showing the strain of the difficult year in media, with television, movies and cable having to work harder for less advertising revenues and sales. In this climate, Disney looks pretty good.

Disney's Future
Despite a difficult year in its movie business and a tough year in its parks and leisure segment, along with the upcoming acquisition of Marvel Entertainment (NYSE: MVL), where integration of Marvel's properties may be harder to achieve long term than it appears, Disney's Chairman Bob Iger sits atop an empire with one of the greatest brands - an empire which even in a down year throws off more than $3 billion in free cash flow. Disney's history is that it has always continued to move forward, developing and deploying new properties from its creative arsenal, and it has built enormous consumer trust in its brand. This next fiscal year should still be challenging, but look for Disney to stay ahead of its competitors again, as it sits confidently atop the media and entertainment world.

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By Greg Sushinsky

Greg Sushinsky is a passionate independent investor, who has done his own research, analysis and investing for 20 years. One of his earliest investing memories was when he first saved and bought U.S. Savings Bonds with his own money as a small child. From there, he studied investing on his own and made small stock purchases as he grew as an investor.

Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.

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