The Walt Disney Company
) delivered strong third-quarter 2012 results, driven by solid
performances of Parks and Resorts and the Studio Entertainment
business. The quarterly earnings of $1.01 a share surpassed the
Zacks Consensus Estimate of 93 cents and jumped 29% from 78 cents
earned in the prior-year quarter. However, including one-time
items, earnings increased 31%.
Total revenue came in at $11.1 billion, up 4% year over year.
However, it missed the Zacks Consensus Estimate of $11.2 billion.
Total segment operating income increased 18% year over year to $3.2
Through its strong operating results, Disney continued to invest
in its core businesses while expanding its operating margins.
Moreover, the company remains well positioned to drive revenue in
the coming years through its strategic initiatives.
revenue increased 3% year over year to $5.1 billion, reflecting a
3% increase in Cable Networks and Broadcasting revenue. The
segment's operating income marked an increase of 2% to $2.1
billion. Cable Networks' operating income inched up 1% to $1.9
billion driven by growth across ABC Family and domestic Disney
Channels partially offset by a decline at ESPN. Moreover, operating
income at the Broadcasting division increased 7% to $268 million,
signifying increased affiliate and royalty revenues and lower
programming and production costs.
Parks and Resorts
revenue rose 9% to $3.4 billion, while segment's operating income
rose 21% to $630 million, reflecting higher revenues from domestic
parks and resorts, Tokyo Disney Resort and Disney Cruise Line.
Despite difficult operating environment, the company did not
change its strategies, but remained focused on deploying its
capital toward expanding its Parks and resorts business, and in
turn, enhancing its markets and creating long-term growth
revenue remained approximately flat at $1.6 billion, while
operating income surged to $313 million compared with $49 million
in the year-ago quarter, manifesting increases at worldwide
theatrical results and worldwide television distribution from
strong performance of Marvel's
revenue increased 8% to $742 million, while segment operating
income increased 35% to $209 million, reflecting revenue gains at
Merchandise Licensing along with retail business.
revenue for the quarter decreased 22% to $196 million, while
operating loss improved as the segment reported an operating loss
of $42 million compared with $86 million in the prior-year quarter,
due to strong games and online business.
Despite marking a decline in operating income, ESPN had a record
number of viewers in the quarter, and remained the favorite
destination for sports lovers. In the last few years, ESPN, with
its right mix of exclusive sporting licenses and top sporting
leagues emerged as an industry leader in the pay-TV industry.
Other Financial Details
During the quarter, Disney generated free cash flow of $2.1
billion. The company ended the quarter with cash and cash
equivalents of $4.4 billion, net borrowings of $10.6 billion and
shareholders' equity of $40 billion, excluding non-controlling
interest of $2.1 billion.
Strong results poise the company well to enhance shareholders
value through share repurchases. During the reported quarter it
bought back 8.6 million shares for approximately $373 million.
Fiscal year-to-date, Disney repurchased 55 million shares for
approximately $2.1 billion.
Walt Disney is one of the world's leading diversified
entertainment companies. Moreover, the company commands a
formidable portfolio of globally recognized brands, primarily its
namesake brand Walt Disney, followed by ABC, ESPN and Marvel
Entertainment. These renowned brands offer a strong competitive
edge to the company and bolster its well-established position in
the market against major players like
Time Warner Inc
We maintain a long-term 'Neutral' recommendation on the stock.
However, the shares of Disney currently retain a Zacks #2 Rank,
which translates into a short-term 'Buy' rating.
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