The Walt Disney Company
) posted fourth-quarter 2012 earnings of 68 cents a share, which
came in line with the Zacks Consensus Estimate and jumped 15%
from the year-ago quarter.
The increase in the bottom line was driven by revenue gains at
the Parks and Resorts business along with the strong performance
of Cable Networks division. Including one-time items, earnings
increased 17% year over year.
Total revenue marked an augmentation of 3% year over year to
$10,782 million but missed the Zacks Consensus Estimate of
$10,903 million. Total segment operating income increased 11%
year over year to $2,339 million.
revenue elevated 2% year over year to $4,881 million, reflecting
an increase of 2% in Cable Networks coupled with a 1% rise in
Broadcasting revenue. The segment's operating income marked an
increase of 7% to $1,571 million boosted by a 9% jump in the
Cable Networks' operating income, which reflected strong
performance of ESPN and the worldwide Disney Channels.
However, operating income at the Broadcasting division
declined 4% to $192 million, signifying lower advertising revenue
and higher equity losses at HULU.
Parks and Resorts
revenue rose 9% to $3,425 million, while segment's operating
income surged 18% to $497 million, reflecting higher revenues
from domestic parks and resorts, Tokyo Disney Resort and Disney
Disney remains focused on deploying its capital toward
expanding its Parks and resorts business, and, in turn, enhancing
its markets and creating long-term growth opportunities.
revenue declined 4% to $1,402 million, while operating income
plunged 32% to $80 million compared with $117 million in the
year-ago quarter, reflecting decline in the worldwide theatrical
results coupled with increased film cost write-downs. However,
worldwide home entertainment results positively contributed to
revenue increased 8% to $883 million, while segment operating
income rose 29% to $267 million, reflecting revenue gains at
Merchandise Licensing along with retail business.
revenue for the quarter waned 14% to $191 million, while
operating loss improved as the segment reported an operating loss
of $76 million compared with $94 million in the prior-year
quarter, due to strong performance of social games business.
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 growth in the coming years through its strategic
Despite difficult operating environment, the company did not
change its strategies and remained focused on deploying its
capital toward expanding its Parks and resorts business, and in
turn, enhancing its markets and creating long-term growth
The company made notable progress in expanding its global
footprints and augmented its operations in the developing markets
such as Russia, China and India. In Russia, Disney launched an
over-the-air Disney Channel.
To drive growth in China, the company is building Shanghai
Disney Resort, which includes Shanghai Disneyland, two themed
hotels, and retail dining and entertainment venue.
Moreover, Disney completed the acquisition of the remaining
50% stake in UTV, India. The company's strategic move will not
only enhance its presence in India but will also position it well
with respect to movie offerings.
Disney entered into a multi-year agreement with the National
Collegiate Athletic Association (NCAA) for international
broadcasting rights of Men's Basketball. The deal effective
immediately, runs through 2023-24.
The success of ESPN continued as the latter witnessed a record
number of viewers during the year, while remaining the favorite
destination of sports lovers. In the last few years, ESPN, with
its right mix of exclusive sporting licenses with top sporting
leagues emerged as an industry leader in the pay-TV industry. It
is to be noted that ESPN remains the key driver of revenues at
the Media Networks division in recent times.
Further, Disney agreed to acquire George Lucas' Lucasfilm Ltd.
for a cash and stock deal worth $4.05 billion. Disney stated that
it will pay half of the amount in cash and will issue 40 million
shares upon closure.
We believe the acquisition will not only fortify Disney's
position but will also expand its world-class portfolio of
content while creating long-term opportunities by driving revenue
growth through its multiple platforms, which include theme parks,
consumer products, media networks and studio entertainment.
Other Financial Details
During the quarter, Disney generated free cash flow of $602
million. The company ended the fiscal year with cash and cash
equivalents of $3,387 million, net borrowings of $10,924 million
and shareholders' equity of $39,759 million, excluding
non-controlling interest of $2,199 million.
Strong results poise the company well to enhance shareholders
value through share repurchases. During the reported quarter, it
bought back 19.1 million shares for approximately $973 million.
In fiscal 2012, Disney repurchased 72 million shares for
approximately $3 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 currentlyretain a Zacks #3 Rank,
which translates into a short-term Hold rating.
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