How Did Walt Disney Just Double on the Stock Market?

By Mitchell Clark, B.Comm. for Profit Confidential

 

The Walt Disney Company DIS has been doing exceedingly well operationally and on the stock market over the last few years.

Disney’s annual sales and earnings growth have been very good and consistent. The position just doubled on the stock market over the last 18 months, which is truly amazing.

The company’s latest quarterly earnings actually fell six percent to $1.4 billion, but revenues grew five percent to $11.3 billion, with particular strength in its U.S. theme park business.

Earnings on an adjusted basis handedly beat Wall Street consensus. Company management expects continued strength and margin improvements from its theme parks this year. A new set of Star Warsfilms are expected to start in 2015.

Disney’s fiscal 2013 first quarter saw a seven-percent improvement in media networks, parks and resorts, and consumer products sales. The laggard in its latest quarterly earnings was studio entertainment, which fell about five percent to $1.6 billion.

Growth at the company’s theme park and resorts division is being driven by domestic demand and rising prices. International theme parks are still soft.

Management cited increased guest spending at theme parks combined with higher occupancy rates for the boost in this division. In its first quarter, Disney incurred higher costs and lower average cruise ticket prices for its “Disney Magic” ships. Disney’s stock chart is featured below:

Chart courtesy of www.StockCharts.com

Last year was a record year for the company in terms of revenues, earnings, and earnings per share. Get ready for a Star Wars media blitz in a couple of years. Disney plans to cross-sell the brand in all its businesses.

Considering the stability and consistency of Disney’s growth in terms of revenues and earnings over the last three years, it’s understandable why it’s a stock market favorite.

Big investors have been buying mostly the safest stock market names. Since the beginning of the year, the Dow Jones Industrial Average has been the strongest stock market index, compared to the S&P 500 and the NASDAQ Composite.

The lack of leadership in technology is a problem, so far. It’s going to be difficult for this rally to be sustainable without a broadening of the stock market’s performance. Only earnings will tell.

Optimism for Disney’s theme park business is good, but the numbers also showed continuing weakness outside of the U.S. market. (See “Breakouts All Around: Final Countdown or the Beginning of a New Cycle?”)

Weakness in Europe and Japan, and slower growth in China should be noticeable once again this earnings season.

The good news from Disney was that four out of five of its main operating divisions showed solid growth last quarter.

Now at an all-time high on the stock market, Disney should report another solid quarter again in early May.