MickeyBlog News – Disney’s 4th Quarter Earnings Report
The latest edition of MickeyNews is all about one thing. Today, we’re going to tear apart Disney’s fourth quarter earnings report from November 9, 2017. We’re also going to discuss all of the revelations from CEO Bob Iger’s conference call. Several huge news items were revealed in this call, all of which point toward a bright future for Disney fans.
The headline that you’ll see about Disney’s 4Q report is that they missed their earnings forecast. It’s a silly thing that analysts do wherein they project a set of numbers for a corporation. Then, when the business fails to meet these expectations, it’s somehow the fault of the company rather than the person whose (presumably) educated guess wasn’t correct. Let’s ignore the nonsense and discuss what matters.
Disney had another amazing quarter. Their profit was $1.75 billion on $12.78 billion in total revenue. If you own stock in a Disney, possibly one of those adorable framed stock certificates that they no longer sell, you made $1.07 per share in the quarter. That’s a strong number for any company. For Disney, it’s another sign that for all the news reports indicating that their media division is a lodestone, their business is stronger than ever.
Wall Street has started to figure this out. DIS stock hovered around $97 three months ago. At the close of business on Friday, November 10th, it was at $104.78. That’s the highest point since August 8th. Not coincidentally, that was the day of their 3Q earnings report, the one that announced Disney’s media trajectory for the next couple of years. Three months later, calmer heads have prevailed, as the unmistakable positives of The Walt Disney Company’s holdings have become too numerous to ignore.
Even More Numbers!
Disney effectively closed the books on 2017 with their fourth quarter earnings report. The holiday season begins their fiscal 2018. Keeping this in mind, we now know some final details about the year as a whole.
Disney’s earnings per share were virtually identical in 2017 to 2016, $5.70 vs. $5.72. Operating income for 4Q was down a bit from $13.1 billion to $12.8 billion. I’d be remiss to ignore a couple of factors at play here. Hurricane Irma had a historic impact on daily operations at Walt Disney World, closing the park early on two days and closing it completely on two others. Also, Disney had one-time BAMTech expenses factored into this quarter.
For the year, Disney’s earnings were $55.1 billion, again similar to 2016’s $55.6 billion. Technically, the corporation’s earnings fell 1 percent year-over-year. For all the handwringing about ESPN, Disney’s revenue is steady and reliable. In fact, Disney’s media division earned $23.5 billion this year after garnering $23.7 billion in 2016.
The powerhouse of Disney’s portfolio is the one that matters most to you and me. The Parks & Resorts division is an absolute juggernaut. Even with the hurricane issues, Disney’s theme parks grossed $18.4 billion for the year. That’s an increase of more than $1.4 billion from 2016’s fiscal year. Yes, the Happiest Places on Earth increased 8 percent year-over-year from what was already a stunning fiscal 2016. There’s just nothing negative to say about Disney’s Parks & Resorts division right now.
You’re probably wondering why Disney’s numbers are down if the media and theme park divisions were up $1.3 billion in total. That’s a fair question, and the answer is that Disney lost money in its other two departments, one of which was inevitable.
You probably knew already that Disney’s 2016 movie schedule was historic in nature. The company earned a record-shattering $9.44 billion from their Studio Entertainment division in fiscal 2016. They still did phenomenally well in fiscal 2017 thanks to massive blockbusters such as Beauty and the Beast, Star Wars: Rogue One, and Guardians of the Galaxy 2. They just didn’t have enough to counter Star Wars: The Force Awakens, which debuted during the first quarter of fiscal 2016. For that reason, Disney “only” earned $8.38 billion from its movie studios.
Also, Disney’s Consumer Products & Interactive Media division struggled in the fiscal year. After grossing $5.53 billion in 2016, revenue fell to $4.83 billion. I haven’t gone line by line on this data yet, but my presumption is that the closure of Disney Infinity late in fiscal 2016 has had significant ripple effects in fiscal 2017. They had videogame merchandising opportunities in perpetuity as long as that game existed that are gone now.
That $700 million in lost revenue combined with the gap in movie studio revenue offsets the strong performances of the entertainment and parks divisions. And it’s still a huge positive overall for Disney. Why? Their fiscal 2018 movie calendar is poised to be every bit as good as fiscal 2016, starting with Star Wars: The Last Jedi and Coco over the next few weeks.
Actually, that’s not quite true. It ALREADY started with the massive debut of Thor: Ragnarok, which has earned more than $500 million worldwide after only a few days in theaters. In addition, Disney merchandise will spike this holiday season thanks to the presence of another true Star Wars film, as opposed to the standalone film from this past fiscal year, Rogue One.
Similarly, a decade of Marvel Cinematic Universe movies concludes with the heavily anticipated The Avengers: Infinity War. The toy sales opportunities from that title are glorious. And the box office revenue should break records, too. Disney’s poised to have the two most popular films of the next six months, both of which will go into fiscal 2018 revenue. They’re poised to have another amazing year on the heels of 2016 and 2017, wherein they had combined revenue of $110.8 billion. Make no mistake. Disney is one of the true corporate powerhouses in the world.