The Walt Disney Company (DIS) just doubled its equity market capitalization over the last 24 months. It is a stunning performance and a breakout from its long-term trend.
What stood out in the company’s latest quarter was its earnings growth. Profitability is improving substantially due to increased spending at theme parks.
Once again, Disney’s parks and resorts business segment grew strongly, up eight percent in the recent quarter to $3.7 billion. The company’s largest revenue segment is from media networks, which is a very mature and saturated market. Media network sales grew only one percent to $4.95 billion in the most recent quarter.
Company management specifically noted that there was a noticeable increase in guest spending at domestic parks and resorts. This led to a big increase in Disney’s consumer products sales which grew 14% to $1.0 billion in the latest quarter.
If you want a very good breakdown of the company’s global operations, take a look at its annual form 10k, which breaks down all of the company’s holdings and their respective financial performance.
Consolidated sales include the Walt Disney World Resort in Florida, the Disneyland Resort in California, the Aulani Disney Resort & Spa in Hawaii, the Disney Vacation Club, the Disney Cruise Line, and Adventures by Disney. The company owns 51% of Disneyland Paris, 48% of the Hong Kong Disneyland Resort, and 43% of the Shanghai Disney Resort.
Two years ago, Disney and Shanghai Shendi Group Co., Ltd. got approval from the Chinese government to build and operate the Shanghai Disney Resort in the Pudong district of Shanghai. Targeted to open by the end of 2015, this resort will start off relatively small, being built on 1,000 acres with 1,220 rooms in two hotels. With capital expenditure estimated to be between $4.0 and $5.0 billion, there is plenty of land available at the project for future expansion.
Disney’s been spending a lot of money lately, but the company can afford it. At the end of last year, it bought Lucasfilm Limited, LLC for $2.2 billion in cash and 37.1 million shares (for a total of $4.1 billion at the time). This has proven to be an extremely good deal for George Lucas because of the stock’s recent price appreciation.
If you take a look at the company’s financial results going back to 2009, both top- and bottom-line growth has been solid and consistent.
Total annual sales in 2009 were $36.0 billion with $3.61 billion in earnings. Fiscal 2013’s total sales came in at $45.0 billion with earnings accelerating to $6.64 billion.
You can see in the company’s numbers the strength in domestic theme park spending. Fiscal 2013 total sales for the domestic segment grew 10% to $11.4 billion over the previous fiscal year.
Management noted that domestic theme parks saw a five-percent increase in average guest spending and a four-percent increase in volume. Higher average prices for tickets, food, beverages, and merchandise, as well as higher hotel room rates, did not deter demand. (See “Who the Stock Market Leaders Will Be This Earnings Season.”)
As an equity investment, Disney is likely to keep doing well on the stock market. Wall Street estimates have been going up consistently for the next two fiscal years.
It would be nice if the company would offer up more in terms of dividend income for shareholders. On a big stock market retrenchment, Disney could be an attractive long-term investment opportunity.