Disney's Earnings Boom Highlights the Dow's Hundred-Point Jump

Whole Foods plunges on an otherwise strong day for investors.

May 7, 2014 at 2:30PM
Daily Fool

The market today is bouncing back from the week's struggles, as the Dow Jones Industrial Average (DJINDICES:^DJI) has roared back from earlier weakness to gain 106 points as of 2:30 p.m. EDT. It's not getting much help from Disney's (NYSE:DIS) stock despite the entertainment giant's upbeat earnings report. Across the market, things aren't always so rosy for investors: Whole Foods' (NASDAQ:WFM) stock has plummeted by 19% on the supermarket chain's own earnings report. Let's catch up on what you need to know.

Productivity down, Disney up
The U.S. economy didn't have a good start to 2014, and today's report from the Department of Labor won't help that trend. American productivity sank at an annualized rate of 1.7% through the first quarter of 2014. Even as Americans worked more hours, with the measure of working hours gaining 2%, output barely nudged higher and wages increased only 0.5% when accounting for inflation. The winter's harsh weather likely had an impact, but it's also likely that dropping productivity took some of the air out of the economy and its estimated 0.1% GDP rise for the first quarter --  some economists now believe that the American economy actually shrank during that time.

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The cold weather didn't hurt Disney during its most recent quarter, however, as the company rode its smash animated hit Frozen to a 35% revenue gain in its movie studios division. The film, which has made more than $1.1 billion worldwide during its theatrical run and opened in a few major markets during the first quarter, was a big reason why Disney's net profit jumped 27% year over year through the opening three months of the year. While shareholders have taken the results with a shrug today, as Disney's stock has actually fallen 0.3%, long-term investors should feel good about the direction of this company as revenue rose 10% for the quarter and beat analyst expectations.

It's more than just movies powering Disney's success. The company's media networks group continues to perform well, growing operating income by 15% behind growing affiliate fees for networks such as ESPN despite lower advertising revenue in the quarter from the sports media giant. Even Disney's theme parks division showed a double-digit percentage operating income jump, a strong sign heading into the warmer months. If Disney can keep growth in its parks surging, 2014 could be even bigger than analysts and investors hope -- and could establish this stock as one of the Dow's brightest long-term plays.

Whole Foods same-store sales gained 4.5% in the quarter, but that fell below analyst expectations. Don't blame winter weather entirely, as through the six weeks that ended on May 4, such sales were up 4.3%. Competition is a big reason Whole Foods is feeling the heat even as revenue jumped 10%, with lower-cost rivals moving into the organic food niche. Company CEO John Mackey still sees Whole Foods gaining market share in the competitive organic field, but told investors that the company had set its sights on overly optimistic goals. While Whole Foods isn't imploding by any measure given its growth in overall and same-store sales, investors need to keep an eye on rivals crowding into the organic space. It'll be up to Whole Foods to keep differentiating itself and excelling to stand out from the pack.

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John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends Walt Disney and Whole Foods Market. The Motley Fool owns shares of Walt Disney and Whole Foods Market. 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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