MickeyBlog News – Disney Fiscal 2018 Money Edition
The Walt Disney Company reported their annual earnings last week. MickeyBlog News has researched all the financials so that you don’t have to bore yourself with the details. The TL:DR (too long, didn’t read) of this update is that it was a record-setting year at the Mouse House. Let’s quickly go over the specifics…and I promise I won’t make it super-boring for you. Disney Fiscal 2018 was simply amazing.
Disney Had a Good Year
Technically, Disney announced two sets of numbers yesterday. The first was the fourth quarter earnings for their fiscal 2018. No, 2018 isn’t over yet, but this is how corporations deal with their accounting. They pick a date to start their calendar year, generally one with the best tax benefits.
This fact leads us to the second set of numbers, the full year data. This number is the most important one, as it reveals how a corporation has done in comparison to prior years. Again, the TL:DR here is that Disney had a historic “2018” in terms of revenue.
Let’s start with the basics. In last year’s article, I mentioned the silly way that analysts evaluate earnings. They project their own numbers and then hold a company accountable if it doesn’t meet those expectations. It’s a ridiculous practice that sets corporations up to fail.
Disney’s 2018 was so impressive that even the unrealistic projections couldn’t hold it down. For the fourth quarter, it easily surpassed the forecasted $1.34 earnings per share by $0.14. In other words, Disney did 10 percent better than Wall Street expected.
More importantly, its performance wildly outperformed the one I reported on for 2017. Last year, earnings per share were $1.07 for the quarter. This year, it was $1.48 per share. Yes, Disney improved more than 38 percent in the fourth quarter of 2018. We will see this play out in a bunch of ways. Let’s hit the high points first before your eyes start to glaze over.
Bigger Is Better
Here is the big number. Disney increased revenue by $4.3 billion last year. In fiscal 2017, the studio accrued $55.1 billion. For the current year, they soared to $59.4 billion. If you’re wondering, the answer is yes. It’s quite rare for a corporation as old as Disney to experience this sort of year-over-year increase.
Where did Disney experience so much profit? The obvious answer is also the correct one. The film division claimed huuuuge gains. Studio Entertainment improved from $8.379 billion in 2017 to $9.987 billion in 2018.
In simpler terms, movie goers spent $1.6 billion more on Disney movies over the past 12 months. We will call that the Black Panther effect. That film grossed $1.344 billion on its own. So, Disney movies earned about $250 million more…plus Black Panther. Its box office dominance was so significant that it had an impact on Disney’s bottom line.
This impact spread across all major phases of Disney. Operating income went up almost $1 billion, gaining from 2017’s $14.775 billion to $15.706 billion in 2018. Most impressively, net income spiked 40 percent. Numbers crunchers know that this is arguably the most important number for a corporation. It’s how much a company gained after subtracting the various costs of doing business.
Disney Earned a LOT of Money
For Disney, 2018 was a high-water mark in net income. During 2017, they gained an exceptional $8.98 billion. The overwhelming majority of corporations would kill for that kind of profit. In 2018, Disney absolutely crushed that performance. Its net income was $12.598 billion.
As a point of reference, CBS aka the Columbia Broadcasting System is a Fortune 200 corporation. Their total revenue for the past year was $14.71 billion. Disney almost NETTED that much. If you want a simpler comparison, Disney’s profits last year exceeded Mastercard’s total earnings ($12.497 billion).
The other interesting number is cash flow. For a corporation like Disney, having cash on hand is critical to the business. They need liquidity for emergency situations like park attractions or new monorail trains or the like. More capital also reduces their dependence on banks and other lenders who would charge the company interest on loans. Disney doesn’t want to pay those fees, and so they keep a lot of money on hand. To some, it’s a more important metric than net income.
In 2017, Disney’s free cash flow was $8.72 billion. Over the past 12 months, the company’s improved 13 percent to $9.83 billion. They’ve effectively saved for a $10-billion dollar rainy day.
A Quick Breakdown by Division
I understand that I’ve thrown a lot of math at you. Let me go over one last key component of the annual earnings report and then we’ll call it a day.
After restructuring, The Walt Disney Company has four main divisions. Three out of the four increased for the quarter and the year. Let’s start with the outlier.
Consumer Products & Interactive Media is the new division created after the restructure. It carried over some existing debts and lost some sources of revenue. As such, it’s down from the fourth quarter of 2017, dropping from $373 million to $337 million. For the entire fiscal 2018, the division decreased six percent from $1.744 billion to $1.632 billion.
That’s the full list of troubling items on Disney’s balance sheet right now. They need to do better with Consumer Products & Interactive Media. Not coincidentally, Disney made some announcements to address this, one I’ll cover in a companion piece about the company’s Earnings Call news.
Everything else increased mightily. Disney’s Media Networks division, a worrisome topic for many business analysts, once again exceeded expectations. It improved four percent for the quarter, although it was down four percent for the year as I’d previously indicated was likely due to prior quarter struggles.
The division that matters the most to you is obviously Parks and Resorts. The news here is glowing. For the quarter, Disney improved from $1.475 billion during the fourth quarter of 2017 to $1.528 billion for the most recent quarter. For fiscal 2018, Parks and Resorts earned $695 million more than in 2017. The final tally was $4.469 billion. Disney’s theme park system is a fine-tuned money-making machine, my friends.
Finally, the film division experienced a comically large increase from the fourth quarter of 2017, when it earned a modest $218 million. This year, that number swelled to $596 million. No, you don’t see that sort of explosive growth very often. For the year, Disney movies earned $2.98 billion, up 27 percent from 2017’s $2.355 billion.
At this point, I’m not exaggerating when I say that The Walt Disney Company is one of the best performing corporations on the planet. Their consistent growth is a stunning feat for such a mature company.