Disney (DIS) has a long history of both aggressive and wise brand management; it operates in four business segments, each of which allows for plenty of cross-company marketing and sales prospects, observes blue chip stock expert Richard Moroney, editor of Dow Theory Forecasts.
Since Snow White and the Seven Dwarfs premiered in 1937, it has been re-released eight times, along the way inspiring toys, theme-park rides, video games, and a Broadway musical.
Disney became the first company to blend films and theme parks with traditional media when it purchased the ABC network in 1996, which kicked the branding potential up another notch.
Even now, 90 years after Mickey Mouse introduced himself to the world in Steamboat Willie, Disney still trades on the power of his iconic image.
These days, the company creates its own brand networks, such as producing television shows, action figures, and themed thrill rides connected with its movies, controlling many levers on the machine. Over the last year, Disney parlayed sales growth of 8% into 21% higher per-share profits and 16% higher operating cash flow.
While all of the units are economically sensitive, they follow their own cycles, allowing for fairly steady companywide sales and profit growth over time as strength in some areas offsets weakness in others.
The media unit includes the ABC broadcast network but generates most of its revenue from cable stations, particularly the various Disney Channels and ESPN.
The parks and resorts unit has enjoyed gains in both attendance and guest spending sufficient to offset higher costs in recent quarters. The consumer-products unit includes Disney’s interactive media properties. Studio entertainment provides the biggest booms and busts, as one or two blockbusters can make a year — and set a high bar for the next.
A pending $71 billion deal to purchase assets from Twenty-First Century Fox (FOXA) should beef up Disney’s media and studio units. At less than 16 times projected year-ahead earnings, Disney trades at a discount of at least 17% to the median for both the media and movies & entertainment industries.
The company reported adjusted per-share profits of $1.84 for the December quarter, down 3% but well ahead of the consensus of $1.55. Revenue held flat at $15.30 billion but also topped analysts’ expectations. Operating cash flow slipped 6% to $2.10 billion.
Sales rose 7% at Disney’s media unit and 5% for its parks and consumer products segment, offsetting a 27% decline at the studio business. Disney’s studio ran into a tough comparison from the year-ago quarter, which was boosted by the release of Star Wars: The Last Jedi and Thor: Ragnarok.
Within the media unit, broadcast operating income surged 40% from higher ad sales and affiliate fees, while the cable-network’s operating income fell 6% due to higher programming costs at ESPN. Disney is rated as a Long-Term Buy.
