The Walt Disney Company (DIS – Free Walt Disney Stock Report), a media and entertainment conglomerate, has reported mixed fiscal first-quarter (ended December 31st) results. Share earnings came in at $0.80, 18% above the year-earlier period and $0.10 higher than our estimate. On the other hand, revenues of $10.78 billion rose just 0.6%, year over year, and fell short of our $11.18 billion forecast. The stock moved slightly higher in early morning trading following the report.

Healthy performances at Disney's cable networks (namely ESPN and ABC Family) and Parks and Resorts, combined with its strong roster of brands (including Disney, Pixar, and Marvel studios), helped the Dow-30 component get off to a decent start this year (both domestically and abroad).

ESPN benefited from higher affiliate revenues, thanks to contractual rate increases and better international subscriber growth. Additionally, ad revenue grew nicely, due to more units sold. All told, Disney's sports network offset somewhat tighter conditions at its other channels. Indeed, higher marketing costs (due to increased promotion of new shows) at ABC and higher production expenses incurred from original programming at ABC Family and the Disney Channel cut into some of its profits. Nonetheless, we look for stronger viewership rates (including global audiences) and better ad revenues to help lift its networks in the coming months.

Subsequent to the quarter's end, Disney created a new affiliate agreement with Comcast (CMCSA) that should augur nicely for its cable networks. This deal enables the company to focus on multiplatform access, and Comcast will pay Disney for distribution rights to its ESPN, Disney, and ABC shows, and limit non-subscriber access. Specifically, the agreement allows Comcast Xfinity subscribers access to Disney's networks on more devices (i.e., smartphones and tablets) and online. Plus, Disney has widened its global reach with the acquisition of India-based broadcaster and film studio, UTV Software Communication.

The Parks and Resorts segment also grew nicely in the interim, with revenues advancing 10%, year over year. Increased attendance and guest spending at domestic parks and resorts bolstered results. Although labor cost inflation and higher employee benefits at Walt Disney World Resorts have weighed on margins at this segment, increased ticket and food/beverage prices at its facilities have helped offset increased operating expenses. Likewise, these moves helped raise Disney's returns on its investments in its Parks, Resorts, and Cruise lines over the past few years. Disneyland Hong Kong and Shanghai also contributed nicely during the December period, countering less favorable totals from Disneyland Paris. Its new cruise line, Disney Fantasy, set sail in January, 2012, and should help this segment over the coming months.

The company's film studios have reduced production output, and are now more focused on driving quality, a strategy Disney will likely pursue through 2013. Despite moderate success from The Muppets, this segment faltered in comparison to last year. Overall, we believe that its good slate of titles, including the live-action film John Carter, Pixar's Brave, and Marvel's The Avengers will help strengthen its brands and be accretive in the near term.

All told, we believe Disney will derive more value from its brands, partially by delivering family entertainment on multiple platforms. Too, ongoing geographic expansion should better diversify its portfolio. Plus, DIS ought to continue its share-buyback program, thereby aiding per-share comparisons. Consequently, we have increased our fiscal 2012 bottom-line estimate by a dime, to $3.00 a share.

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.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.