Summary
- The latest quarter for The Walt Disney Company proved the company is a best-of-breed prospect in its space.
- Despite pain in some areas, the company as a whole fared well considering the COVID-19 pandemic's effects.
- The decision to forgo the dividend again is a wise move and the firm's rapidly-growing streaming service is evidence of the brand's strength.
- Looking for a helping hand in the market? Members of Crude Value Insights get exclusive ideas and guidance to navigate any climate. Get started today »
One of the most interesting companies on the market today is The Walt Disney Company (DIS). Not only is the firm a top tier long-term prospect operationally, it is intriguing because it’s difficult to know what to expect during the COVID-19 pandemic. Quarter after quarter, the entertainment giant has demonstrated pain caused by the shuttering and reduced traffic at its parks and resorts, while also suffering from a delayed theatrical release schedule. On the other hand, the business is a great play on the rapidly-growing streaming space, and some of its other properties are cash cows that can thrive in most any environment. This dichotomy has created some uncertainty for investors, but in its fourth quarter earnings release, the management team at the business provided enough data to illustrate that the good undeniably outweighs the bad. As a result, Disney should be considered an excellent long-term prospect for value-oriented investors.
A mixed quarter
According to the company’s fourth quarter earnings release, Disney took a hit on both the top and bottom lines. Revenue for the quarter came in at $14.71 billion. This implies a drop of 23.1% compared to the $19.12 billion seen the same quarter last year. This pain, predictably, came from two of the company’s sets of operations: Parks, Experiences, and Products, and Studio Entertainment. Revenue for Parks, Experiences, and Products came in at $2.58 billion. This is down 61.2% compared to the $6.66 billion seen the fourth quarter of the business’ 2019 fiscal year. Revenue for Studio Entertainment, meanwhile, nearly halved from $3.31 billion to $1.60 billion.
Not every part of Disney was hit though. Media Networks, for instance, saw revenue surge, rising from $6.51 billion last year to $7.21 billion in this year’s fourth quarter. That’s a gain of 10.8% year-over-year. Direct-To-Consumer and International revenue also fared quite well, rising from $3.45 billion to $4.85 billion. In fact, this segment has surged all throughout the company’s 2020 fiscal year, with revenue skyrocketing 80.8% from $9.39 billion to $16.97 billion. Given that this is the part of the business dedicated in large part to Disney’s streaming operations, this shouldn’t come as a surprise.
On the bottom line, Disney was hit as well, but not by as much as some investors might have thought. Total segment profits came in at $606 million, down from $3.43 billion a year earlier. Net profits were -$710 million compared to $777 million last year. It should be mentioned that one place the company saw relief from was its ownership in DraftKings (DKNG). During the quarter, the company saw the fair value of its investment in the company rise by $591 million.
