Overall, its credibility has helped it to earn a higher P/E multiple; thus, one slightly lower quarter should not send the stock price down 17%. Its past credibility and superior position in the industry can be evidenced by the revenue growth it has posted in comparison to its peers. It has TTM revenue growth of 8.37% versus -9.04% for Fox and -1.42% for CBS. Similarly, this is also shown on a three year basis. It has three year revenue growth of 6.08% versus 4.98% for Fox and 0.41% for CBS. It has a slightly different financing structure than its peers, so its net earnings per share growth has been satisfactory; however, its gross margin comparisons again show its superior industry lead. It has produced a TTM gross margin of 45% versus 36% for Fox and 40% for CBS. Its operating margin further illustrates this point. Disney’s operating margin for the last twelve months is 24% versus 20% for Fox and 19% for CBS.
In the past, the market has rewarded Disney for its revenue growth and superior operating abilities. As long as it continues to post superior revenue growth, the market is going to continue to allow it to trade at its current multiples. Given the firm’s current product rollouts, this should not be a problem for Disney. Overall, no other competitor in the industry is launching entertainment products that can match the revenue production of Disney right now.
It currently has on tap the release of Star Wars: The Force Awakens on December 18 which will significantly influence its first quarter and 2016 revenue, specifically adding to sales revenue in its Studio Entertainment segment. While the movie release does not occur until December 18, sales from affiliated products are already underway and should significantly impact fourth quarter revenue in Consumer Products for 2015. Added sales revenue from Frozen and Avengers should also help the Consumer Products segment overall to see annual revenue growth of approximately 15%.
In Studio Entertainment the firm also has a continued rollout of Star Wars films planned. In addition to the release of The Force Awakens, the firm also has annual releases of Star Wars films planned through 2019 which should help Studio Entertainment see continued minimum annual sales growth of 5%.
These are the firm’s main strengths as it nears the end of 2015. However, it also has a whole host of other revenue sources that help it continue to maintain its strong market share. Specifically, its cable network channels Disney and ABC have been thriving for the firm with ABC leading the industry in primetime ratings growth and Emmy award nominations.
While the market overall has been hard on Walt Disney Co (NYSE:DIS)’s stock in recent weeks, analysts have posted high projections for the firm in anticipation of its product rollouts. For the fourth quarter, analysts are projecting revenue growth of 9% and earnings per share growth of 27%. For the full year, analysts expect revenue growth of 7.4% and earnings per share growth of 17.6%. Given the company’s sales initiatives across all of its product lines, Disney should have no problem meeting and exceeding these expectations.
