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5 Magical Numbers From Disney's Record Fiscal Year

By Demitri Kalogeropoulos – Nov 12, 2018 at 4:17PM

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Disney got back to wowing investors in fiscal 2018.

Following a rare step lower last year, Disney (DIS -2.21%) is back to its old habit of smashing records. The entertainment and media giant just wrapped up a fiscal 2018 that treated investors to its best-ever sales, net income, and earnings per share. Including 2017's slight decline, Disney has now achieved record revenue and profit results in seven of the last eight years.

Let's take a look at a few of the standout metrics that made this a year to remember for The House of Mouse.

Runaway box office

Disney closed the quarter with a head-turning 50% sales spike in its studio division on the strength of films like Incredibles 2 and Ant-Man and the Wasp. These movies join a jam-packed 2018 release portfolio that, with help from Black Panther and Avengers: Infinity War, should allow the company to easily dominate the U.S. box office for a second straight calendar year. Over the full year, the studio business jumped 19% to $10 billion and became far more profitable as operating income spiked 27% to $3 billion. 

Two adults and two children watching TV together.

Image source: Getty Images.

Pricing power

Disney's parks and resorts business grew sales by 10% but improved profit at a much-healthier 18% rate for the year. The revenue result was helped along by solid demand in its domestic parks and by impressive gains in the Shanghai, China, resort during its second year in operation.

The margin expansion, meanwhile, was powered by increased prices at parks, hotels, and cruise ships. It's especially good news for the business that demand remains so strong even as Disney asks its guests to pay more for their live entertainment experiences.   

Slowing subscriber losses

The company's media division was its worst performer for the second straight year, but investors have good news to celebrate on this score. The rate of subscriber losses at ESPN dipped to below 2%, in fact, executives revealed in the quarterly conference call. That success marked the fifth consecutive quarter of improving trends, which suggests that this cash cow business segment has stabilized at a more moderate rate of decline.

A direct route to consumers

Disney has held most key metrics for its new direct-to-consumer ESPN streaming service close to its chest. We don't know cancellation rates, for example, or engagement figures like hours watched. But CEO Bob Iger did reveal that ESPN+ has passed 1 million subscribers after its second quarter of existence. Without getting specific, Iger said management is still seeing "impressive growth" from its sports fan base.

Spending money to make money

Disney warned investors to expect a slow start to fiscal 2019, mainly because last year's fiscal first quarter included the runaway theatrical hits of Star Wars: The Last Jedi, Thor: Ragnarok, and Coco. A lighter schedule over the next few months could mean profits from the studio segment are down as much as $600 million compared to last year.

At the same time, the company expects to book another loss of at least $100 million tied to its digital media strategy for ESPN+. Investors can expect these launch losses to grow in magnitude when its broader Disney+ service is released in late 2019. The closing of its 21st Century Fox acquisition is likely to create some short-term volatility in earnings, too.

Yet these two massive bets, on Fox studio assets and on subscription streaming, work well together since they'll give Disney a bigger trove of intellectual property and a firmer grip on the global box office. It shouldn't be too hard to use that valuable content, including movie releases from its 2019 slate, to entice tens of millions of members to try out its direct-to-consumer streaming service when it launches in less than a year.

Demitrios Kalogeropoulos owns shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool has a disclosure policy.

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