The specter of declining cable subscribers has long haunted Disney (DIS -0.45%), and the paradigm shift in the media landscape has given investors reason for pause. With the acquisition of assets from Twenty-First Century Fox (FOX) (FOXA) largely on track, investors are increasingly turning their eyes to the future. One area capturing the imagination of shareholders is the potential offered by the emergence of streaming video, an area where the House of Mouse is eager to make a name for itself.

When Disney reported its fiscal fourth-quarter and full-year financial results, the company provided solid results from its legacy businesses while offering a vision for the future.

The Sleeping Beauty Castle at Disneyland

Image source: Author.

Better-than-expected growth


Q4 2018

Q4 2017

Year-Over-Year Change


$14.31 billion

$2.78 billion


Segment operating income

$3.29 billion

$2.81 billion


Net income

$2.32 billion

$1.75 billion


Adjusted earnings per share




Free cash flow

$2.65 billion

$2.67 billion


Data source: Disney fourth-quarter 2018 financial release.

Disney reported revenue of $14.31 billion, up 12% year over year, topping analysts' consensus estimates of $13.72 billion. Profits were also better than expected, with adjusted earnings per share of $1.48 easily surpassing the $1.33 anticipated by analysts. The growth was broad-based, as all but one of Disney's operating segments contributed to the top-line gains:

Revenue source

Q4 2018

Q4 2017

Year-Over-Year Change

Media networks

$5.96 billion

$5.47 billion


Parks and resorts

$5.07 billion

$4.67 billion


Studio entertainment

$2.15 billion

$1.43 billion


Consumer products

$1.12 billion

$1.22 billion


Data source: Disney fourth-quarter 2018 financial release.

While the media networks segment increased revenue by 9%, what was most interesting was what contributed to those gains. They got a big boost from the broadcasting business, which grew 21% year over year, due to the sale of Black-ish and two Marvel series, compared to just one in the prior-year quarter. Cable networks revenue increased 5% year over year, but operating income declined as Disney continues to invest in BAMTech, the technology subsidiary that underpins its streaming ambitions. The operating income gains from media networks more than offset declines from cable. Meanwhile, operating income at ESPN was comparable with the prior-year period.

The parks and resorts segment was another big contributor to the quarter's success, with revenue that increased 9% year over year. Attendance was up 4% and the company saw guest spending increase by 9%, thanks to higher ticket prices and increased food and beverage spending.

Of course, the most dramatic increases came from the studio entertainment segment, as revenue grew 50% year over year, and profitability more than doubled. The success of both Incredibles 2 and Ant-Man and the Wasp drove the results, due to easier comps, with only Cars 3 being released in the prior-year quarter.

The company continues to benefit from the record-setting slate of Marvel blockbusters from earlier this year, which boosted Disney's home entertainment. Avengers: Infinity War outshined competition from Guardians of the Galaxy 2 in the prior-year quarter.

The future will be streamed

Disney CEO Bob Iger spent a fair amount of time on the conference call talking about two subjects near and dear to his heart: the successful integration of the company's Twenty-First Century Fox acquisition, and the development and expansion of Disney's streaming ambitions.

Iger pointed out that the company received regulatory approval from the European Union for the Fox acquisition this week, noting that it came much sooner than Disney anticipated. "Last June, we estimated it could take up to 12 months for the transaction to close, but we are increasingly optimistic it will be meaningfully earlier than that," Iger said.

Disney continues to view streaming as one of its "top priorities," and Iger reminded investors that ESPN+ has already topped 1 million subscribers. The company would like to follow that success with its upcoming Disney-branded streaming service, and we finally know what to call it: Disney+.

In a separate press release, Disney detailed a number of high-profile series that will debut on Disney+. These will include a second Star Wars live-action series, which will follow the adventures of Rebel spy Cassian Andor, and a Marvel original series based on Loki, the god of mischief, with the role of Loki being reprised by veteran Avengers actor Tom Hiddleston.

The stars of Disney's "High School Musical" at a reunion smiling and laughing, while sitting on a couch in a high school gymnasium.

The cast of Disney's High School Musical reunites. Image source: Disney.

There will also be entries from Pixar's Monsters Inc. and Disney's High School Musical, as well as The Mandalorian, another Star Wars adventure that will be written and executive produced by Emmy-nominated producer and actor Jon Favreau, who directed and acted in Iron Man (as bodyguard Happy Hogan). The series will get a number of well-known directors behind the camera, including Bryce Dallas Howard, and Taika Waititi of Thor: Ragnarok fame.

A look ahead

Disney doesn't provide quarterly guidance, so we'll turn to Wall Street for its view (though we won't get caught up in its short-term mind-set). For the upcoming 2019 fiscal first quarter, analysts' consensus estimates are calling for revenue of $15.64 billion, an increase of 1.9% year over year, and earnings per share of $1.84, a decline of 2.6%.

With roots going back nearly a century, Disney has been able to navigate changes in the consumer landscape in a way lesser companies could only imagine. Many investors have fretted that Disney would be unable to make the transition from its cable-centric media operations to streaming-centric ones. Based on what we know so far, the company's parks and resorts and studio segments have been able to pick up the slack for the media segment while the transition is ongoing and the streaming operations get off the ground.

With the company's decades of experience navigating changing societal trends, it just wouldn't pay to bet against Disney.