Last week, Walt Disney (NYSE:DIS) grabbed headlines with the announcement that it will only air advertisements for healthier food options on their children’s television programming.
Additionally, the company is revamping their menus at their theme parks by offering healthier food options. Although everyone can agree that child obesity is an issue of national concern, can this company really tell our kids how to eat? More importantly, is this stock a healthy addition to your well-balanced portfolio?
Let’s find out.
In 1923, the Disney brothers founded a cartoon studio that ultimately gave birth to beloved animated characters Mickey Mouse and Minnie Mouse. Over the decades, the Walt Disney brand has grown into one of the world’s largest mass media companies, with 14 theme parks around the world, one of Hollywood’s most established studios as well as dozens of cable television networks. In total, Walt Disney Co. employs 156,000 worldwide and brings in over $40 billion in sales every year.
There is no doubt about it; Walt Disney is the premier name in Diversified Entertainment. Out of the 100 companies in this industry, the company is the largest in terms of market capitalization, and its 1.4% dividend yield is fourth highest. Walt Disney also stands out in terms of its Price/Earnings to Growth ratio and earnings growth, which are both at no. 9.
Additionally, the company’s long-term growth rate and return on equity are at 14th and 15th respectively. Walt Disney’s largest competitors are News Corp. (NASDAQ:NWS) and Time Warner (NYSE:TWX). Of these three companies, Walt Disney has the lowest sales growth, lowest growth margin and second-highest operating margin.
After the closing bell last Tuesday (June 6), Walt Disney reported solid operating results for the second quarter, including 21% earnings growth and 6% sales growth. The company also topped the Street earnings estimate by 5%.
Looking ahead to the next quarter, management and Street analysts alike are bullish about the company’s Marvel subsidiary. Thanks to blockbuster ticket sales of its summer flick, “The Avengers,” analysts expect the company to grow sales by 7% and earnings by 18%. This company has topped the consensus earnings estimate for each of the past four quarters, so things are looking good for its next earnings announcement.
Before you buy any stock, you should always run it through my free Portfolio Grader ratings system.
Even though there is room for improvement on the fundamentals side, I consider DIS a B-rated buy. The stock has climbed modestly since last Monday’s announcement, so it looks like investors aren’t fazed with the company’s new approach to nutrition.
Recommendation: B-rated Buy
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