If you’re looking for a strong stock in the entertainment sector, look no further than Walt Disney Co (NYSE:DIS), a company that showed up big-time for its latest earnings report.
Disney is trading at all-time highs, and even the measles haven’t been able to put a damper on Disney’s shares. But for several reasons, I think DIS stock is going even higher.
Dazzling Earnings: Disney posted first-quarter revenues of $13.4 billion, up 9% over the year-ago period’s $12.3 billion. In addition, earnings rose from $1.03 per share to $1.27, an increase of 23% year-over-year. Analysts say those numbers are some of the most impressive in Disney’s history.
Not surprisingly, merchandise was a major money-maker for DIS, increasing 22% for the quarter to a tune of $1.4 billion. It’s also no surprise that the juggernaut know as Frozen led the way in consumer product sales. Although Frozen was released in November 2013, merchandise related to the movie continued to make DIS money throughout last year, amounting to a 7% increase in all consumer products for the year.
Disney’s largest segment — television and cable networks — also improved, with Q1 revenues up 11% YOY to $5.6 billion, and Disney theme park revenues advanced 9% to $3.9 billion.
DIS Has Hit the Entertainment Jackpot: It’s not an overstatement to say that the movie Frozen is a phenomenon, one of the biggest movies of all time. DIS has not only cashed in on the movie, but also the merchandising that goes along with it. There are Frozen lunch boxes, action figures, even Frozen Halloween costumes. Every little girl wants to be Elsa or Annabelle.
But that’s not the end of the Frozen story. DIS is expected to release a related short film, Frozen Fever, later this year. The sequel Frozen 2 is expected in 2016. And if the excitement that still surrounds Frozen is any indication, the next installment of the movie franchise should be another cash cow for Disney.
The Disney Cachet and Brand: There is perhaps no other American entertainment company as beloved as DIS. Characters like Mickey Mouse and Minnie have been around for decades and have become cultural phenomena not just in the United States, but around the world. Children, parents and grandparents all know the DIS brand and understand what it stands for: good old-fashioned “American” values. That’s why its theme parks are constantly packed despite hundred-dollar tickets, and why Disney merchandise still kills it on retail shelves.
Bottom Line
As long as the world’s thirst for diversions in the forms of movies, television and kitsch continues — and it will — the sky is the limit for this entertainment giant.
As of this writing, Will Emerson did not hold a position in any of the aforementioned securities.
