A Closer Look at Disney Earnings

On Tuesday, Disney DIS announced stellar earnings. This is a stock that reached an all-time high on Tuesday, is up 50 percent in the past year, and has a priced-to-perfection chart. Even the slightest hint of disappointment should have sent this stock tumbling but in pre-market trading on Wednesday morning, that hasn’t happened. That’s because it’s fiscal Q2 report was solid. It shows that investors were right to bid this stock up. Let’s dig in.

EPS ex-items increased 36 percent year over year from $0.79 versus analyst consensus of $0.76. Revenues were up 10 percent year over year coming in at $10.6 billion versus consensus of $10.4 billion.

Disney’s investments in new attractions at its parks drew more visitors, according to CEO Bob Iger. This made the parks and resorts segment the largest year over year gainer with revenue of $3.3 billion—a 14 percent year over year gain while operating income increased 73 percent.

Thanks to movies like OZ the Great and Powerful, John Carter, andWreck-it Ralph the studio division revenue of $1.3 billion represents a 13 percent increase from the same quarter in 2012. Even more impressive, a profit of $118 million compared to negative returns one year prior.  

The company’s media networks were up 6 percent, once again anchored by ESPN, a network that continues demand higher ad revenue.

The only dark spot in an otherwise strong report was the performance of the broadcast division and anybody who watches network TV knows why. Operating income was $138 million- a year over year decrease of $91 million. This was due to higher programming costs along with lower advertising revenue.

ABC is currently in last place in the 18-49 demographic. On the conference call, Iger said, “On the network front, we’d like a stronger primetime schedule, particularly with programming that we own.” Maybe all of us investors are partial but let’s give the network credit for its reality series, Shark Tank. Other than that, it’s easy to see why this unit is struggling.

Aside from a network full of programming that most viewers don’t want to watch, the report was strong and the future is better. In the studio division, Iron Man 3 has now made more than $700 million. That will appear on the fiscal Q3 report. The studio’s Marvel acquisition has proven to be a huge revenue driver and its recent $4 billion acquisition of LucasFilm will allow it to develop more Star Wars properties for TV, film and its parks.

Barton Crockett, Senior Media and Entertainment Analyst at Lazard told CNBC on Wednesday that the stock is still a buy at current levels.

Disclosure: At the time of this writing, Tim Parker had no position in any of the stocks mentioned.