Movies, entertainment and theme park powerhouse Walt Disney (DIS) reported adjusted earnings per share of $0.08, versus the -$0.63 estimate, in fiscal Q3 2020; sales were $11.8 billion, versus the $12.4 billion estimate, asserts John Buckingham, value investing expert and editor of The Prudent Speculator.

The company’s Parks segment had revenue of $983 million (vs. $6.575 billion in Q3 last year) and Studio Entertainment saw a similar drop to $1.7 billion (vs. $3.8 billion in Q3 last year), while revenue for Media Networks and Direct-to-Consumer segments was roughly flat year-over-year.

Although DIS did post a positive adjusted EPS number, we note that it is adjusted for non-cash goodwill and intangible impairment charges nearing $5 billion and the GAAP diluted loss per share is -$2.61. There is some leeway in the adjusted financials, but they are generally not expected to be recurring.

We think Disney’s performance in the current environment has been remarkable, with the help of good fortune getting the timing right on the Disney+ launch.

While the major sports leagues have restarted or are nearing a restart, we believe that the entertainment landscape will look very different for the foreseeable future and we have been impressed with Disney’s ability to pivot quickly.

The company’s streaming services, Hulu and Disney+ in particular, have been crucial during the pandemic and we think that the momentum is unlikely to abate as the restrictions are lifted.

This is especially true as management announced that the oft-delayed premiere of the live-action potential-blockbuster Mulan will happen not in theaters but on Disney+ on September 4…for an additional $29.99 fee.

While the company claims this is only a one-off decision to skip theaters due to the pandemic, it will be an interesting test case…and the market was very enthused about this development.

DIS has discontinued its July dividend payment in order to preserve cash and expects to revisit a decision for the back half of fiscal 2020 late this year, but our enthusiasm for the company remains strong as ever. Our target price for DIS has been hiked to $147.

Subscribe to The Prudent Speculator here…