Disney Has Another Great Quarter

| About: The Walt (DIS)

On Tuesday evening, Disney (NYSE:DIS) which happens to be one of my favorite stocks in the 'Retire Young' portfolio, announced its quarterly earnings. It turns out that the company had another great quarter overall. Compared to the same quarter last year, Disney's profit jumped by 32%, mostly due to better advertisement rates for the company's TV networks, great box office results for the company's latest movies and strong demand for the company's theme parks. It is evident that Disney's growth story is far from over.

Compared to the last year's 63 cents per share, the company was able to earn 83 cents per share which beat the average analyst estimate by a few cents. The quarterly revenue was up by 10% to $10.55 billion. Except for the Interactive operating unit, which is responsible for making video games and other digital products, all of Disney's business units posted profit growth, which is very impressive. It's very rare to see a large company with many business units where almost every business unit posts growth. Disney's management rarely invests money into a project that doesn't pay off greatly within a short time.

The company is already trying to figure out ways to make money off its recent purchase of Lucasfilm. Apart from a new Star Wars movie scheduled for 2015, there will be many other products based on Star Wars and other Lucasfilm legacies. For example, Disney recently signed a partnership with Electronic Arts (NASDAQ:EA) for a new Star Wars video game. Also, as mentioned in the conference call, the company is trying to figure out ways to incorporate Star Wars characters into its theme parks and there might be also a TV show in the making. Disney surely knows how to milk its acquisitions.

Disney's business unit responsible for theme parks and cruise ships posted a profit growth of 73% compared to the same period last year. While price increases accounted for some of this, the revenue of this business unit was up by 14% compared to the same quarter last year. Last year, Disney invested in a new cruise ship and upgraded some of its theme parks, and this seems to be paying off greatly for the company.

Two Disney movies, Oz the Great and Powerful and Wreck-it Ralph, posted strong results and Iron Man 3 is expected to be one of the highest performing movies in history. The movie opened with global revenue of $711 million, which is the second best opening of all time (the top spot belongs to another Disney movie, The Avengers). In the last quarter, Disney's movies generated $1.34 billion in revenues. Disney's TV networks generated $4.96 billion in revenues, which is up 6% compared to the last year. ESPN was one of the company's biggest strengths in the quarter.

The company's cash reserves increased from $3.39 billion to $3.95 billion. Disney doesn't like to hold a lot of cash in its reserves, so I expect one or more of 1) a dividend increase, 2) share buybacks or 3) maybe another major growth-generating investment from the company. In fact, during the conference call, the company's CEO Bob Iger was asked about what the company plans to do with its cash and he acknowledged how the company doesn't have a tendency to hoard cash.

Jessica Reif-Cohen, a senior analyst at Bank of America acknowledged the company's successful quarter by saying "The company is obviously hitting on almost all cylinders." The company did not provide guidance for the future as it never does, but analysts are likely to upgrade their expectations. As of right now, analysts expect Disney to earn 77 cents per share this quarter, $1.09 per share in the next quarter. For the full year, analysts expect Disney to post $3.46 per share in profits. These numbers are likely to be upgraded in the coming days.

As I mentioned before, we have 200 shares of Disney in our `Retire Young` portfolio on April 30th. We added the shares at $62.75 and sold covered calls on the shares with a strike price of $65.00. As a result of this trade, we collected a premium of $1.42 per contract. Currently, Disney trades for $65.10, which means that our strike price was met and we will not be able to profit if the share price goes further up. If our shares get called right now, we will be posting a profit of 5.85% in 7 days. Even if the shares get called, we will purchase the same shares again because this is one of the stocks every portfolio should have.

Through smart acquisitions, cost cutting and good investments, Disney will continue to see strong growth for years to come. It's very rare to see a company valued at above $100 billion posting double-digit growth as easily as Disney does. This is a company that excites everyone it interacts with including but not limited to employees, consumers and investors.

Disclosure: I am long DIS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.