Walt Disney Co.: Earnings Highlights November 10, 2017 1444

Description

The Walt Disney Company (NYSE:DIS) is an entertainment company. The Company operates in four business segments: Media Networks, Park and Resorts, Studio Entertainment and Consumer Products & Interactive Media. The Media Networks segment includes cable and broadcast television networks, television production and distribution operations, television and radio stations. Under the Parks and Resorts segment, the company designs and develops new theme park concepts and attractions and resort properties. The Studio Entertainment segment produces and acquires live-action and animated motion pictures, direct to video content, musical recordings and live stage plays. It also develops and publishes games, books, magazines and comic books.

Source: Thomson Reuters

Earnings Summary

DIS reported worse than expected earnings for 4Q17:

  • EPS of USD1.07(-3% YoY) missing consensus estimates by USD0.08
  • Revenues of USD12.78bn (-3% YoY) missing consensus estimates by USD560mn

Streaming Details: DIS’s CEO Bob Iger mentioned that the new ESPN streaming service would be called ESPN Plus and would be set to launch in spring 2018. The sports streaming service would launch with an app and offer scores and highlights. It would also allow streaming of channels for cable subscribers as well as the ability for all to subscribe to live events.

Iger also mentioned that the Disney content streaming offering would come in late 2019 and would include content from its major brands like Star Wars, Marvel, Disney as well as Pixar. These offerings would add 4-5 exclusive feature films per year as well as original series, such as a Star Wars live action series.

Studio Offerings: DIS Studio entertainment revenue was down 21% to USD1.4bn. Theatrical distribution revenue was down primarily to Cars 3 performance being worse compared to Finding Dory in the prior-year quarter. There was also an increase in film cost impairments due to DIS writing off an animated film that was in development that they do not plan to release. Worth noting is that the recently released Thor:Ragnarok, which had the fourth-largest opening weekend of 2017 (beating Wonder Woman, which is the 2nd highest grossing film of 2017 YTD), was not included in this quarter’s results. We believe that DIS’s slew of content remains healthy and well received by consumers.

DIS also announced plans to develop a brand new Star Wars trilogy after the current trilogy ends in 2019. The first part of the current trilogy Star Wars: The Force Awakens was the largest grossing domestic film of all time and 3rd largest grossing worldwide film.

Moving forward into 2018, besides Star Wars Episode 8: The Last Jedi, FY18 would also include the stand-alone Han Solo, a popular and iconic Star Wars character, as well as 4 more Marvel movies, including an Avengers movie.

Conclusion: While DIS reported worse than expected numbers, we believe that DIS is poised to report strong results in FY18 on the back of its upcoming content. We are also looking forward to the ESPN streaming service launch and whether that will help soothe worries about ESPN numbers. As such, we continue to be positive about DIS and believe that it remains a sound investment.

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About the author

Profile photo of Ho Kang Wei

Ho Kang Wei
Investment Analyst
Phillip Securities Research Pte Ltd

Ho Kang Wei graduated with a Bachelor of Commerce, majoring in Accounting and Finance, from Monash University.

He started analysing and investing in US equity markets since 2008. Joining Phillip Securities Research in 2015, he is the analyst in charge of US markets.

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