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6 Metrics Behind Disney's Strong Fiscal 2018

By Daniel Sparks - Nov 21, 2018 at 6:31PM

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Disney has crushed the market over the past 12 months. Here's what helped drive the stock higher.

Walt Disney (DIS 0.73%) stock may not have garnered the same attention many volatile tech stocks have over the past 12 months, but the media company has nevertheless quietly outperformed the market over this time frame. Shares have gained more than 10% as the S&P 500 moved just 3% higher.

Disney stock's outperformance has been well-earned. The company saw revenue, net income, and earnings per share all rise to a record level as the company started executing on its important transition to a direct-to-consumer business model. Looking back on Disney's fiscal 2018, here are some of the most telling takeaways from the year.

A man using the ESPN Plus app on his smartphone.

A man using the ESPN+ app on his smartphone. Image source: ESPN.

1. Revenue increased 8%

Disney's fiscal 2018 revenue rose 8% year over year to a record $59.4 billion. This was a welcome change in the direction of Disney's top line after the company suffered a 1% pullback in revenue in fiscal 2017. 

2. Adjusted earnings per share increased 24%

With revenue rising nicely, Disney's profitability followed suit. Operating income rose 6% year over year and adjusted earnings per share jumped 24%. This was again a big improvement compared to fiscal 2017, when operating income fell 6% year over year, and adjusted earnings per share were flat compared to fiscal 2016.

Key contributors to Disney's improved profitability in fiscal 2018 were the company's strong performance in its studio entertainment and parks and resorts segments.

3. Parks and resorts operating income rose 18%

Higher guest spending and attendance growth in the U.S. played a key role in helping Disney's parks and resorts operating income rise 18% year over year in fiscal 2018.

"Attendance at our domestic parks was up 4%, and per capita spending was up 9% on higher admissions, food and beverage, and merchandise spending," management said in Disney's fourth-quarter earnings call. "Per room spending at our domestic hotels was up 8%, and occupancy was up 1 percentage point to 85%." 

4. Studio entertainment operating income surged 27%

Strong performance from new movies in theaters in fiscal 2018 played a vital role in helping studio entertainment operating income rise 27% year over year. In addition, Disney's fiscal 2018 studio operating income of $3 billion was also meaningfully higher than the segment's previous record of $2.7 billion in operating income in fiscal 2016.

"Our studio results demonstrate once again that our relentless focus on quality, creative excellence, and compelling storytelling can lead to consistently strong financial results," management said in its fourth-quarter earnings call.

5. Media networks operating income declined 4%

Despite a 4% year-over-year rise in media networks revenue in fiscal 2018, the important segment's operating income declined 4%. This decline, Disney said, was due to lower advertising revenue, higher losses from Disney's stake in Hulu and in its subsidiary BAMTech, and higher contract rates for sports programming. Though media networks' operating income for the year was lower, the decline wasn't as bad as the segment's 11% year-over-year pullback in operating income in fiscal 2017.

Fortunately, Disney wrapped up fiscal 2018 on the upswing when it comes to its media networks business. The segment's revenue for the quarter was up 9% year over year, and its operating income rose 4%.

6. Disney repurchased 34.6 million shares

During fiscal 2018, Disney spent $3.6 billion repurchasing 34.6 million shares.

Looking ahead

Disney has an important year ahead of it. Disney CEO Bob Iger laid out the company's biggest priorities for fiscal 2019 in the company's fourth-quarter earnings call:

[T]he successful completion and integration of our 21st Century Fox acquisition and the further development of our [direct-to-consumer] business, which includes adding new content and subscribers to ESPN Plus, gaining majority stake in Hulu and launching our highly anticipated Disney branded service late next year.

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