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Media and entertainment conglomerate The Walt Disney Company (DIS Free Disney Stock Report) issued fiscal fourth-quarter and full-year results. In all, the company closed fiscal 2019 on a mixed note. Nevertheless, investors seemed pleased by the media giant's near-term prospects, and the stock was up modestly in today's early session.

Sales came in at $19.1 billion and $69.57 billion for the quarter and year, 34% and 17% higher than the 2018's figures, respectively (and just $50 million shy of our estimate). However, the bottom line fell precipitously over the same period. Diluted earnings from continuing operations tumbled a respective 72% to $0.43 and 17% to $6.27 for the September quarter and fiscal 2019, missing our forecast by $0.89 per share.

Even though the ongoing integration of 21st Century Fox, alongside strength across its various operating units, helped lift the top line, higher input costs, restructuring expenses, and eliminations (stemming from the consolidation of Hulu) hindered the bottom line's progress over the last few months.

Looking ahead, we imagine Disney will invest heavily in its branded content. Moreover, direct-to-consumer (DTC) streaming ought to remain a key priority in the coming months. Indeed, the company is set to launch Disney+ in the U.S., Canada, and the Netherlands on November 12th. The streaming platform is scheduled to launch in Australia and New Zealand the following week. And management penciled in March 31, 2020 as the date for the roll out to markets across western Europe.

The DTC growth strategy should enable Disney to keep up with the ever changing media landscape and better compete with its industry peers. Likewise, management believes that this will transform its business and help it thrive in the future. The company has inked distribution agreements with Amazon.com (AMZN) Fire, Samsung, LG, and Verizon (VZ Free Verizon Stock Report). And it previously announced that Disney+ would be available through Apple (AAPL Free Apple Stock Report), Alphabet’s Google (GOOG), Microsoft (MSFT Free Microsoft Stock Report), Sony, and Roku. Bundled packages with ESPN+ or Hulu are likely to be introduced, too. 

Disney will probably post weak comparisons during the first quarter of fiscal 2020. Higher operating expenses, owing to hefty investment in its streaming platform, as well as the integration of 21st Century Fox may well temper earnings growth. Management expects that it will lay out $500 million more than last year in capital spending. 

On the other hand, Disney+, as well as the success of its other business segments, should pick up as the year progresses. Too, Fiscal 2020 will have an extra week in the final quarter, which should help boost totals. 

All told, we imagine the bottom line should bounce back 20% to $7.50 per share for the full year.

The Walt Disney Company has a long history and stellar finances. The recent overhaul of its small screen services, namely the DTC platform, should provide great avenues of future growth. Thus, we are optimistic that the company is poised to do well over the long haul. That said, this stock has gained a lot of ground over the last few years, and much of the capital appreciation we envision over the next 3 to 5 years is already factored into the recent quotation.


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; Marvel in December, 2009; and Twenty First Century Fox in March, 2019.

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