Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Disney's Q4 Earnings Delight Investors; Stock Pops Nearly 4% on Friday

By Beth McKenna - Nov 10, 2019 at 11:37AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The entertainment giant is barreling toward the Nov. 12 launch of its Disney+ streaming service on a strong note.

Walt Disney ( DIS -0.67% ) reported its fiscal fourth-quarter and full-year 2019 results after the market closed on Thursday. For the quarter, the entertainment titan's revenue jumped 34% and its adjusted earnings per share (EPS) declined 28% year over year.

The company's iconic movie studio business was the star of the quarter, with parks turning in a fine supporting performance. Its Twenty-First Century Fox (21CF) acquisition, which closed in March, added considerably to the top line but also negatively impacted profits due to integration-related costs. 

Disney stock closed up 3.8% on Friday. We can attribute the market's delight largely to earnings soundly beating Wall Street's consensus estimate. Shares of the consumer discretion company also likely got a boost from management's upbeat comments on the earnings call about the Disney+ streaming service, slated to launch in the United States, Canada, and the Netherlands on Nov. 12. In 2019, shares have returned 26.6%, edging out the S&P 500's 25.5% return.

Exterior view of Cinderella's Castle at Walt Disney World in Florida with the sun setting or rising in the background.

Image source: Disney.

Disney's key numbers

Metric

Fiscal Q4 2019

Fiscal Q4 2018

Change

Revenue

$19.10 billion

$14.31 billion

34%

Segment operating income

$3.44 billion

$3.28 billion

5%

GAAP net income

$785 million

$2.32 billion

(66%)

GAAP earnings per share (EPS)

$0.43

$1.55

(72%)

Adjusted EPS

$1.07

$1.48

(28%)

Data source: Disney. GAAP = generally accepted accounting principles. 

Wall Street was looking for adjusted EPS of $0.95 on revenue of $90.04 billion. So the House of Mouse breezed by the profit expectation and slightly beat the top-line estimate.

For fiscal year 2019, Disney's revenue rose 17% year over year to $69.57 billion, segment operating income dropped 5% to $14.87 billion, and adjusted EPS fell 19% to $5.77. 

Media networks: Operating profit slid

Metric

Fiscal Q4 2019

Change (YOY)

Revenue

$6.51 billion

22%

Operating income

$1.78 billion

(3%)

Data source: Disney. YOY = year over year.

Here's how the two businesses within this segment performed:

  • Cable networks revenue climbed 20% year over year to $4.24 billion, and operating income edged down 1% to $1.26 billion.
  • Broadcasting revenue jumped 26% to $2.27 billion, and operating income fell 4% to $377 million. (Segment operating income also received a lift of $150 million from equity in the income of investees, down 13% from the year-ago quarter.) 

"Lower cable results reflect a decrease at ESPN, partially offset by the consolidation of the 21CF cable businesses," CFO Christine McCarthy said on the earnings call. Broadcasting's results were negatively affected by lower program sales compared to last year. 

Parks, experiences, and consumer products: Parks got their mojo back!

Metric

Fiscal Q4 2019

Change (YOY)

Revenue

$6.66 billion

8%

Operating income

$1.38 billion

17%

Data source: Disney.

The consumer products business continued its robust performance. Operating income was up 36% year over year, driven by "growth in merchandise licensing, as a result of strong revenue growth from sales of Frozen and Toy Story merchandise," McCarthy said on the call. 

After last quarter's rare stumble, the domestic parks and experiences business returned to its usual solid-grower self, with operating income up 13%, driven by "growth at Disneyland on higher guest spending and an increase at Disney Vacation Club," McCarthy added. Results at Disney World were flat with the year-ago period, as "increases in guest spending, occupied room nights and attendance were offset by higher costs associated with the launch of Star Wars: Galaxy's Edge," she continued. Galaxy's Edge opened in late August at Disney World.

Overall attendance at domestic parks was flat with the fourth quarter of last year, though it was up about 1% if we exclude the impact of Hurricane Dorian, which resulted in the Florida parks closing early on Sept. 3. 

Studio entertainment: The quarter's star

Metric

Fiscal Q4 2019

Change (YOY)

Revenue

$3.31 billion

52%

Operating income

$1.08 million

79%

Data source: Disney.

Studio's powerful operating income growth was driven by the theatrical performances of The Lion King, Toy Story 4, and Aladdin performing better in the quarter than Incredibles 2, Ant-Man, and The Wasp did in the year-ago period.

As with last quarter, Disney's legacy studio business performed even better than the segment's results suggest, as the performance of Fox studio's releases dragged down the overall numbers. On the earnings call, McCarthy said that the Fox studio had an operating loss of about $120 million.

DTC and international: Loss widens on spending to build streaming business 

Metric

Fiscal Q4 2019

Change (YOY)

Revenue

$3.43 billion

316%

Operating income

($740 million)

N/A -- Down $400 million from a loss of $340 million in Q4 2018. 

Data source: Disney.

Disney is investing heavily in its direct-to-consumer (DTC) streaming business, which is driving losses. This business is comprised of sports-focused ESPN+, which launched in April 2018, and the broader streaming service, Disney+, which is scheduled to roll out in the U.S., Canada, and the Netherlands on Nov. 12, followed by Australia and New Zealand on Nov. 19. 

A robust quarter with a huge catalyst for growth almost here

Disney turned in a great quarter, though that might not be obvious from the headline numbers due to the hefty costs associated with the Fox acquisition and the heavy spending in advance of the launch of Disney+.

 
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$146.22 (-0.67%) $0.98

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
640%
 
S&P 500 Returns
139%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/04/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.