Disney's Magical Earnings and Office Depot's 400-Store Surprise

The two things you need to know on May 7.

May 6, 2014 at 11:00PM

Like a bad, late-night Cinco de Mayo burrito sitting heavy in your stomach (post-2 a.m. street meat is never a good idea), some sour quarterly earnings reports weighed heavy on investors on Tuesday. The Dow Jones Industrial Average (DJINDICES:^DJI). fell 130 points as Wall Street continues to sell down the tech stocks it's been buying up all through 2014.

1. Walt Disney reports magical Q1 earnings
Thanks, Tinker Bell. Entertainment legend The Walt Disney Company (NYSE:DIS) reported a first-quarter performance that looks like it was high on pixie dust. The company enjoyed $11.65 billion in revenues in the first three months of 2014, above the $11.25 billion analysts were expecting. Shares rose 0.65% in after-hours trading and are already up 6% so far this year.

What's making Disney stock more fun than Disney rides? Frozen, the animated holiday movie. Just last month, the film topped $1 billion in total ticket sales, making it officially the highest-earning animated film in history. Plus, because kids want to also hang out with Olaf, the movie's talking snowman lead, nine out of the top 10 toys sold in Disney stores were related to Frozen.

The takeaway is that Mickey doesn't have all his eggs in one basket. It ain't just Frozen tickets that are driving Disney's stock price up. Disney theme parks set attendance records last year -- and the company just announced that it's investing $800 million in Shanghai Disney and is completing the much-anticipated Seven Dwarfs Mine Train later this month. It'll be the first new roller coaster in Disney World since '06. We'll always be faithful to Splash Mountain, though.

2. Office Depot surges despite 400-store shutdown
Staple these earnings to the front of your screen. America's favorite "No. 2 pencil" supplier, Office Depot (NASDAQ:ODP), reported first-quarter earnings of $4.4 billion, just barely above the $4.3 billion Wall Street projected. Add to that the costs of the company's November merger with Office Max, and the Depot swung to a $109 million net loss.
The big news, though, is what Office Depot is shutting down. As a result of the aforementioned merger, Office Depot now has 1,900 stores in North America, 818 of which are still branded "Office Max." So CEO Roland Smith announced that he's going to close 400 stores by the end of 2016, with 150 going lights-out this year.
So why did shares jumped over 17% Tuesday? It's all about "cost synergies." In the earnings report, Smith made clear that the store shutdowns will save the company $75 million starting next year, which is much sooner than investors expected. And if they use their own three-ring bound binders, we assume it'll go even more efficiently.

  • First-quarter earnings reports: Ceasars Entertainment, Hugo Boss, Molson Coors
  • Federal Reserve Chairwoman Janet Yellen speaks to Congress

MarketSnacks Fact of the Day: People who tend to win the game "Rock-Paper-Scissors" stick to the same hand and strategy each round, while those who tend to lose switch them up.

As originally published on MarketSnacks.com

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Jack Kramer and Nick Martell have no position in any stocks mentioned. The Motley Fool recommends Molson Coors Brewing and Walt Disney and owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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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