Walt Disney Co (DIS): Interactive Might Continue To Remain A Concern


Walt Disney Co (NYSE:DIS) suffered weakness in the interactive division in the last two quarterly financial results. However, the company’s other divisions, such as media networks, parks and resorts, consumer products, and studio entertainment have continued to perform well in the March quarter. The company is said to have an impressive slate of films ready to go that will ensure smooth sailing in the next two years by getting an additional share.

Revenue Generation

As far as Walt Disney Co (NYSE:DIS) is concerned, the interactive division is the only division to generate less than a billion dollars in revenue for a quarter. However, its performance is vital in the final counting. In the last two quarters, the division witnessed a year-over-year drop of 9% and 5% respectively. However, on a sequential basis, the segment recorded 6.1% growth. In terms of the segment’s contribution to the overall revenue, it was 2.9% in the December quarter, which was down from 3.3% in the preceding year period.

The company’s media networks division was the biggest contributor with 43.8% in the first quarter and it likely continued to remain so in the March quarter too. Similarly, its parks and resorts division represented 29.2% of the total revenue while studio entertainment accounted for 13.9% of the total revenue in the December quarter. Studio entertainment was the other segment that witnessed weakness.

Analyst Take

Citigroup Inc (NYSE:C) analyst, Jason Bazinet, said that Walt Disney Co (NYSE:DIS) is predicted to continue adding a bigger slice of share in international box office collections. The company’s acquisition of Pixar and Marvel has boosted the box office collections in the last decade. In the next two – three years, the company has lined up films to ensure additional share.

The brokerage believes that Walt Disney Co (NYSE:DIS) will be a clear outperformer as far as TV licensing and home entertainment performance are concerned. The analyst pointed out that the company’s sales of home entertainment averaged 115% of theatrical revenues since 2011, compared to 97% average of the rivals. Similarly, its licensing revenue averaged 116% of theatrical revenue compared to the studio average of 86%. The company’s momentum in the space is predicted to continue. As a result, the brokerage boosted its price tag to $125 from $110 and retained its rating of ‘Buy’ on Walt Disney shares.

What To Expect

On average, Street analysts estimated the company to report earnings of $1.10 a share and revenue of $12.25 billion for the second quarter. This means that analysts are expecting EPS to slacken 1%, despite projecting revenue to grow 5.1% in the March quarter. During the past four quarters, the company’s earnings have never missed the Street analysts’ expectations. Its winning percentage varies from 0 – 18.7%.

Significantly, there has been no revision in EPS among the Street analysts. Walt Disney Co (NYSE:DIS) will report its financial results for the second quarter on May 5 before the bell.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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