Walt Disney Co (DIS) epitomizes the rare ability of old media dogs to learn new media tricks. The dream factory that Walt built traces its origins to old media. Indeed, in the early 20th century, the company originated the color cartoon and the feature-length animated movie.
But today, in the 21st century, the company is riding the digital wave and reinventing itself as needed.
Case in point: In September, the Disney Interactive division and Marvel Entertainment unveiled Disney Infinity: Marvel Super Heroes, a refresh of last year’s No. 1 selling video game. Disney partnered with Marvel to launch a continually updated series of video games, a joint effort that reaps huge opportunities for cross-marketing. With a 40% market share, private firm Marvel is the world’s biggest comic book publisher and it strikes licensing deals with media companies, which in turn use Marvel’s famous brand name characters (e.g., Spider-Man and X-Men) for a host of products.
This nimble embrace of up-to-date consumer tastes and younger demographics is largely why Disney has made the transition from animation studio to new media powerhouse. As other legacy media companies flounder and fall by the wayside, Disney thrives and is a steady, long-term investment in an industry that’s cyclical and vulnerable to disruption from the latest innovation or fad.
Disney enjoys strengths that many media companies lack, notably diversity. The company operates in a broad array of integrated businesses, including theme parks, TV stations, retail stores and cruise lines. The company’s major divisions are Disney Media Networks, Walt Disney Parks and Resorts,Walt Disney Studios, Disney Consumer Products and Interactive.
Competitors such as Viacom (VIAB) are more susceptible to the cyclical ups and downs of the media business because they can’t fall back on these multiple businesses.
As the global economic recovery continues and tourism expands, Disney’s parks division is poised for solid growth. Moreover, Disney is the originator and still owns the rights to movies that are decades-old icons and deeply cherished by anyone who had a childhood. But it’s not just cultural touchstones such as Bambi and Sleeping Beauty. New cult hits keep coming and they continually fuel the rise of DIS stock. The latest case in point: Disney holds the movie rights to Frozen, the highest grossing animated film in history and a source of seemingly endless merchandising spinoffs.
Hot Performance from Frozen
Walt Disney Company reported impressive fourth-quarter and full-year 2014 operating results. Disney posted fourth-quarter revenue of $12.39 billion, for earnings per share (EPS) of 89 cents, beating the consensus expectation of $12.23 billion and 88 cents. On a year-over-year basis, revenue and EPS posted increases of 7% and 16%, respectively.
All segments performed strongly, especially Studio Entertainment, which was boosted by the phenomenal success of Frozen, which to date has accumulated a jaw-dropping $1.3 billion in worldwide box office revenue.
For the full fiscal year, EPS reached $4.32, beating Wall Street’s projections by a penny and rising 27% compared to the previous fiscal year. The company’s results for fiscal 2014 represented the most profitable in the company’s history and the fourth consecutive year of record performance.
Disney’s portfolio of trademarked intellectual property is a steady revenue-generating machine and abiding source of new marketing opportunities in any conceivable medium. Combined with the company’s ability to quickly adapt to consumer trends and emerging technologies, this media stalwart will continue to thrive as long as people keep having kids.
As of this writing, John Persinos did not hold a position in any of the aforementioned securities.