Disney Posts Record Earnings As Frozen Obsession Continues

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Disney ( DIS ) recently reported its earnings for the second quarter of fiscal 2014 (fiscal years end with September) . The company saw overall revenue growth of 10% and earnings growth of 41%, primarily driven by the success of Frozen. (( The Walt Disney's ( DIS ) CEO Bob Iger on Q2 2014 Results - Earnings Call Transcript , Seeking Alpha, May 6, 2014)) Higher attendance and per capita guest spending at theme parks, along with the popularity of Disney's video game Infinity, further boosted its revenue and operating income. Media networks delivered higher operating income in the second quarter due to growth at both cable and broadcasting. Overall, Disney once again posted good set of numbers with solid growth across the segments.

We currently have $80 price estimate for Disney which we will soon update based on the recent quarterly earnings.

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Media Networks And Theme Parks Continue To Grow

Disney's Media Networks saw steady growth in the March quarter with revenues increasing by 4% to $5.13 billion and operating income up 15% to $2.13 billion.  The increases were driven by higher affiliate fees, which increased by 9% due to higher contractual rates at ESPN. The advertisement revenue at ESPN declined low single-digits in the second quarter due to a decrease in units sold and lower ratings. However, we continue to believe that the advertising revenues will pick up in the next two quarters primarily driven by FIFA World Cup, which ESPN will telecast from late fiscal Q3 into fiscal Q4.

Theme parks continued to show steady growth, especially in the U.S. Theme Parks contribute around 24% to Disney's value, according to our estimates. During the March quarter, revenues in this segment increased by 8% to $3.56 billion and the operating income jumped 19% to $457 million, reflecting higher average guest spending primarily due to higher average ticket prices and food, beverage and merchandise spending. The attendance at the theme parks grew by 3% while per capita guest spending was up 4% for the quarter. Disney continues to benefit from investments at Walt Disney World and the Disneyland Resort. We believe that Disney's theme parks will do much better in the fiscal third quarter, reflecting the benefits of Easter holidays.

Disney Continues To Benefit From Frozen

Revenues at the Studio Entertainment division surged 35% to $1.80 billion while the operating income soared over 300% to $475 million, representing one of the studio's best quarters ever. This can primarily be attributed to the continued success of Frozen , and the 2014 release of Need For Speed and Saving Mr. Bank.

The performance of Frozen has been stellar for Disney. The company saw continued benefits from the movie into the second quarter. The movie was made with a production budget of $150 million and has already grossed $1.17 billion at the box-office globally and is still counting. Frozen is now the world's highest grossing animated film of all time. It is also the best-selling title ever released on Blu-ray and digital. The demand for Frozen merchandise remains extremely high and Disney had to restrict the customers to purchase only two items per order.

Disney's impressive run at the box-office appears to be far from being over. In the next quarter, Disney will benefit from the success of Captain America: The Winter Soldier , which has already grossed over $680 million at the box-office globally. Moreover, the upcoming slate for 2014 is studded with popular titles, including Muppets Most Wanted , Angelina Jolie as Maleficent , Planes: Fire and Rescue and Marvel's Guardians of the Galaxy.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: DIS , CMCSA , CBS , FOX , VIA

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