Shares of Walt Disney (DIS - Free Disney Stock Report) pulled back this morning after the entertainment and media conglomerate and Dow-30 member posted fourth-quarter and full-year 2014 results. (Fiscal year ended September 27th). Full-year share earnings jumped 26%, to $4.26, but came in slightly below our estimate. Meanwhile, revenues increased 7% for the year, to $48.8 billion, ahead of our call.
Fiscal-2014 results broke the entertainment giant's prior top- and bottom-line records. The company registered favorable comparisons across all of its operating segments. We believe that Disney's content pipeline, and ongoing investments in its brands, should boost totals going forward.
Not surprisingly, Studio Entertainment led the pack this year. Revenues jumped 22% and earnings more than doubled from the prior year as Disney continued to bask in the success of Frozen, Guardians of the Galaxy, and Maleficent. Looking ahead, we expect the movie production business to continue delivering healthy results. Indeed, Disney will likely leverage the popularity of the Marvel superhero franchises. And it ought to continue to invest in its theatrical slate. It just released the title of its December 2015 installment of Star Wars VII: The Force Awakens. Plus, Disney has announced there will be a fourth Toy Story film, scheduled for 2017.
Income from Consumer Products, meantime, climbed 22% in the year just ended, thanks in large part to the success of Frozen and Spider Man merchandise. We imagine that Anna and Elsa sales will remain a catalyst for the holiday season.
Its small screen segment has also been progressing nicely. Media Networks income climbed 7% in fiscal 2014 (thanks to 5% and 11% profit growth from the Cable Networks and Broadcasting segments, respectively). Improved affiliate revenue growth and advertising revenues, combined with lower marketing expenses at its cable channels, erased higher programing costs across its networks.
Hefty investments at its Parks & Resorts are paying off, too. Higher attendance and guest spending at its domestic parks boosted totals, offsetting mixed results from some of its overseas venues. In all, revenues and profits at this division were up 7% and 20%, respectively. And the ongoing rollout of MyMagic+ should bolster results at its theme parks, even though the implementation has led to higher operating costs in recent months.
Disney also posted dynamic gains in its Interactive segment. Revenues at this division were up 22% for the full year, and the company posted a profit thanks to the performance of the Disney Infinity video game console.
Moving forward, we believe Disney will continue to build its brands and leverage its content library. Additionally, technological innovation will probably become a key priority as it continues to bolster its business. The company recently acquired digital video production company Maker Studios, and we suspect that it may be eying the marketplace for other hopefully accretive purchases to help expand its digital position or to widen distribution of its media.
The company's stock buyback program should further spur future per-share comparisons. In all, we look for the bottom line to climb another 5%-10% in fiscal 2015, to $4.60 a share. It should be noted, however, that this is a dime lower than our previous share-net call.
All the good news aside, the stock traded modestly lower following the most recent financial release. Disney shares have been strong in recent months, having recently set a new high water mark of $92.00. Any pullback, coupled with the company’s generally upbeat long-term outlook, suggests that this blue chip ought to remain a core holding in most conservative portfolios.
About The Company: The Walt Disney Company operates Media Networks such as ABC and ESPN, and Studio Entertainment. Its world famous parks and resorts include Disneyland, Walt Disney World (Magic Kingdom, Epcot, and Disney’s Hollywood Studios), while the company earns royalties from Tokyo Disneyland and manages Disneyland Resort Paris and Hong Kong Disneyland. It also operates a cruise line and Consumer Products and Interactive Media segments. ABC was acquired in February, 1996, Pixar in May, 2006, and Marvel in December, 2009.