Walt Disney’s Profits and Growth through 2016
Walt Disney has increased earnings by 19% for the year and EPS of $4.90 for the year.
Disney’s theme parks, cruise ships and movies have been successful in 2015 with the
biggest attraction, Star Wars due out in December.
Investors are concerned about the cord-cutters but all satellite companies offer Disney
in their packages. Not having a Disney packet could be a deal breaker for subscribers.
Disney’s stock price is trading at 4.3 times the book value and 24.5 times earnings.
Good, but not over valued for Disney.
Walt Disney (DIS) is one of my favorite companies for several reasons. Disney is the
best company in the world at marketing their products. Second, they have very little
negativity about their company and operations, and third, our family (like most in
America) has visited a theme park, cruise ship, have a t-shirts in the drawer and
constantly watch some form of Disney product.
Walt Disney posted its 4Q financial report on November 5, 2015, and produced a 7%
increase in revenue at $52.5 billion, and net income up 12% to $6.4 billion. Earnings
per share delighted investors, up 15% to $0.95 for the quarter, and up 19% for the year
at $4.90 for the year. For most companies, these would be staggering numbers, but for
Walt Disney, some investors and analysts posted negative comments after the report. I
tend to believe Disney is on track as one of the top 5 companies in the market and
should be part of every investor’s long term portfolio.
(https://thewaltdisneycompany.com/sites/default/files/press-releases/pdfs/q4-fy15earnings.pdf)
During the conference call, Robert A. Iger, chairman and Chief Executive Officer of the
Walt Disney Company stated, “In Fiscal 2015 we delivered the highest revenue, net
income and adjusted EPS in the Company’s history, reflecting the power of our great
brands and franchises, the quality of our creative content, and our relentless innovation
to maximize value from emerging technologies.”
Once again, pretty impressive, but as my old boss use to say, “What will you do for me
next?” Disney is on track to continue the strong performances at their theme parks
around the world and cruise ships to families looking for the entertainment only Disney
can provide.
The Disney media family is the biggest question mark in the company and could pull
Disney down, or it continue the strong growth and productivity it has experienced in the
last several years. Disney continues to produce high-attendance movies with Star Wars
coming out in December. Many see the cord-cutters as a threat to the revenue stream,
but I choose to differ. Every satellite service includes a Disney packet with their basic,
middle and elite service as to corral viewers. If one provider did not include a Disney
packet in each service it would be the nail in the coffin to kill their service. Every other
provider would highlight to distinguish their superior content.
Although Disney is being competitive in rates, Disney is actually the standard for many,
but top of the product line in viewers, which leads to viewership and revenue. Product
placement is what media wants and Disney delivers.
Disney’s stock price has been climbing as of late, and closed on November 19 at
$118.71 and $119.52 during midday trading on November 20th. The stock price has
been climbing over the last month from $111 and the year’s high was $122.08 on
August 4, 2015. Some technical analysts are calling for a ceiling near $120, and I tend
to agree, not based on technical data, but some investors will be taking some profits
today (Friday, November 20) for the week and the month.
Walt Disney’s book value is listed at $27.56. The stock is trading at 4.3 times book
value and 24.5 times earnings ($4.90). These are strong numbers, but I don’t expect
the stock price to climb much for the rest of 2015. For 2016, I assess the earnings will
remain on its current pace and post near $5 for the year. That is near 20% and the
stock price is likely to ascend 20% itself after the Federal Reserve quits playing with
interest rates. It should be a one-and-done move and the 2016 should see some
respectable growth. Disney’s stock should climb to the $140-150 range supported by
20% growth in stock price, fueled by their earnings.
Recommendation: Disney is a buy and hold long term, as we expect a 10-20% return
when we combine its dividend and stock price growth year after year. Disney’s
entertainment divisions will continue to create movies, theme parks and cruise ships will
remain high in attendance and the media division, although going through changes will
continue to produce high viewership. Profits are strong and will continue to be through
2016.