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Walt Disney Co. Earnings: Finding Tomorrowland

By Rick Munarriz - May 5, 2015 at 12:02PM

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The family entertainment giant delivers fiscal-second-quarter results.

Source: author.

Walt Disney (DIS -1.38%) shareholders knew going into Tuesday morning's fiscal-second-quarter report that better days would lie ahead for the media mogul. With big movies set to hit the silver screen in coming months and tough comparisons to a juggernaut of a quarter a year earlier, the market wasn't holding out for much.

Disney wound up clocking in with better-than-expected financials for its latest quarter, and that news sent shares of the family entertainment giant to new all-time highs on Tuesday morning. Revenue climbed 7% year-over-year to $12.46 billion. Adjusted earnings per share grew even faster, rising 11% to $1.23 a share. Analysts were only holding out for a profit of $1.11 a share on $12.25 billion in revenue.

It wasn't a perfect report. Attendance dipped at Disneyland, possibly related to the measles outbreak in January. Escalating sports programming costs resulted in a decline in operating profits for Disney's media and networks division. Studio entertainment posted slight dips in revenue and operating profits, but that was expected given the success of Frozen and Thor: The Dark World a year earlier. On the video game front, the Skylanders-esque Disney Infinity is seeing a decline in popularity during its sophomore year.   

However, the overall growth on both ends of the income statement show that there was more good than bad at Disney during the first three months of the calendar year. The launch of SEC Network last summer, record crowds paying record sums at Disney World, and Frozen merchandise flying off the shelves helped deliver another blowout quarter at the House of Mouse. Disney has now surpassed Wall Street's profit targets in four of the past five quarters. Misses or merely meeting expectations have been rare under Bob Iger's tenure as CEO.

We're not aiming for the truck
There are several promising catalysts that should drive Disney in the near term. We already saw Avengers: Age of Ultron become Hollywood's second-largest movie opening this past weekend, and we have a pair of Pixar movies coming out before Star Wars: The Force Awakens inevitably sets new box office records in December. Summer is also peak travel season for Disney's industry-leading theme parks.

The stock's new highs are warranted in light of another analyst-besting report, but also in light of an interesting assortment of drivers that should make the rest of the calendar year even stronger for Disney.

Disney's earnings release and subsequent conference call were supposed to take place in the afternoon, but cruel fate -- the death of board member Sheryl Sandberg's husband in Mexico over the weekend -- moved the events to earlier in the day so that other board members could join Sandberg at the funeral.

Rick Munarriz owns shares of Walt Disney. The Motley Fool recommends Apple and Walt Disney. The Motley Fool owns shares of Apple and Walt Disney. 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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