Disney: Invest In The Best

After a great earnings release, management at Disney has proven that the company's growth will continue to benefit long-term shareholders.

Feb 11, 2014 at 9:58AM

The Walt Disney Company (NYSE:DIS) recently reported earnings for the first quarter of fiscal 2014. The results were most impressive and they indicate that the company is first and foremost a media industry leader.

Despite its already-large size and massive global reach, Disney is still growing faster in many ways than smaller competitors like Time Warner (NYSE:TWX) and Scripps Networks Interactive (NYSE:SNI).

Aboutdisney

Record earnings
On a year-over-year basis, Disney excelled in all departments. The company's total first-quarter revenue grew to $12.3 billion, up 9% from 2013's $11.34 billion. Net income grew 33% to $1.84 billion from $1.38 billion last year and diluted earnings per share grew an even better 34% to a record $1.03 ($1.04 excluding items), up from 2013's $0.77. 

Disney's latest results also came in ahead of consensus estimates, which sent shares soaring over 5% the following day. The company's reported revenue of $12.3 billion and diluted EPS of $1.03 easily beat the consensus estimates, which called for $12.26 billion and $0.92, respectively. 

Disney Chairman and Chief Executive Officer Robert Iger explained, "These results reflect the strength of our unprecedented portfolio of brands, a constant focus on creativity and innovation, and the continued success of our long-term strategy." 

Behind the beat
The following table shows a breakdown of Disney's first-quarter growth by segment in comparison with last year's comparable quarter: 

Segment

Q1 2014

Q1 2013

Change %

Media Networks

5.29B

5.1B

4%

Parks and Resorts

3.59B

3.39B

6%

Studio Entertainment

1.89B

1.54B

23%

Consumer Products

1.12B

1.01B

11%

Interactive

403M

291M

38%

A quick glance at the company's segment results reveals the true growth driver for Disney recently: its studio entertainment division. This division, which houses Disney's popular movie studios like Marvel, Pixar and Lucasfilm, was spurred to robust growth by better-than-anticipated results from major releases like Frozen and Thor: The Dark World.

Disney's increasing focus on popular entertainment properties like Marvel and Lucasfilm means that studio entertainment will likely remain a standout segment for Disney going forward. When we consider that the beloved Star Wars franchise is only getting started under Disney's management, the growth potential for the segment seems impressive.

The consumer products segment also fared well with growth of 11% year-over-year, in part because of the inclusion of revenue generated by the recently-acquired Lucasfilm. However, just as the company's studio entertainment division is likely to benefit immensely from the impending release of new Star Wars content, Disney's consumer products division stands to benefit greatly as the movies capture the imaginations of a whole new generation of kids and young adults.

However, the fastest growth came from Disney's smallest segment by revenue, interactive. This division experienced 38% growth year-over-year due to the success of video game property Disney Infinity

Large company, large growth potential
Just because Disney has experienced massive success throughout its long and storied history does not mean there is no more opportunity for investors. The fact is that Disney is projected to lead its competitors for the most part with regard to revenue and EPS growth going forward: 

Company

Disney

Scripps Interactive

Time Warner

Revenue Growth 2014

6.6%

7.3%

0.2%

EPS Growth 2014

18.3%

13.4%

9.8%

*Disney's fiscal year ends in September

Impressively, in all but one growth category Disney is projected to lead both smaller competitors in the year ahead. Disney's revenue growth is expected to trail that of Scripps Interactive only slightly in 2014 but the company is expected to experience the most robust EPS growth by far in the year ahead.

Additionally, Disney pays a dividend of $0.86, which equates to a solid yield of 1.2%. This compares favorably to Scripps Interactive's yield of 0.80% but lags behind Time Warner's impressive yield of 1.9%.

Invest in the best
While there are other media companies that are growing faster at the moment, no competitor has a more impressive content library than the great Disney. With properties like Marvel and Pixar firing on all cylinders and with the newly acquired Lucasfilm about to get started, the future looks very bright for Disney and its shareholders. The company's latest earnings results only serve to confirm that Disney is one of the best companies in the world and a great long-term investment. 

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Philip Saglimbeni owns shares of Walt Disney. The Motley Fool recommends Scripps Networks Interactive and Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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