Shares of The Walt Disney Company (DIS) traded with small losses of 1% in after-hours trading. The entertainment conglomerate reported its third-quarter results on Tuesday after the close.
Third Quarter Results
Walt Disney reported third quarter revenues of $11.1 billion, up 4% compared to last year. Revenues came in slightly lower than analysts forecasts of $11.3 billion. Diluted earnings per share rose 31% from $0.77 to $1.01 per share. The company took a mere $7 million in restructuring charges, compared to $34 million last year. Analysts were expecting Walt Disney to report earnings of $0.93 per share.
CEO and Chairman Robert A. Iger commented on the results, "We had a phenomenal third quarter, delivering the largest quarterly earnings in the history of our company. We believe our results clearly demonstrate Disney's unique value proposition and great potential to deliver long-term growth."
Disney's largest division, reported a 3% increase in revenues to $5.08 billion. Cable network revenues rose 3% to $3.61 billion, matched by a 3% growth in broadcasting revenues to $1.47 billion. Cable networks operating income rose 1% to $1.86 billion due to growth at the Disney channels and ABC. The results were partially offset by a decline at ESPN. Broadcasting operating income rose 7% to $268 million, as a result of higher revenues and lower productions costs.
Parks and Resorts
Revenues at Disney's parks and resorts rose 9% to $3.44 billion. Operating income rose 21% to $630 million. The results were driven by increased attendance at the Tokyo Park. Last year, the earthquake negatively impacted results at the Japanese division. Disney Cruise line and domestic parks fared fine as well. Besides attendance growth, spending picked up as well. Labor cost inflation has a negative impact on the division results.
Revenues at the studio and entertainment division were flat at $1.62 billion. Operating income rose to $319 million, compared to $49 million last year. Profits rose sharply on releases such as The Avengers and Brave. Improved performance in theater and television distribution was partially offset by weakness in the worldwide home entertainment market.
Revenues at the consumer products division rose 8% to $742 million. Operating income rose 35% to $209 million. Strong results are the result of new store openings in North America and Europe, as well as strong online sales.
Walt Disney ended the third quarter with $4.4 billion in cash and equivalents. The company operates with $15.0 billion in short- and long-term debt, for a net debt position of $10.6 billion. For the first nine months of its fiscal year, the company generated $31.5 billion in revenues. Disney reported net profits of $4.8 billion, or $2.44 per diluted share. At this rate, the company is on track to report annual revenues of $42 billion and net profits around $6 billion, or $3.30 per share.
The market currently values the company at $89 billion. This values Walt Disney at 2.1 times annual revenues and roughly 15 times earnings. The valuation compares to a revenue multiple of 1.3 times for Time Warner (TWX), 1.6 times for CBS Corporation (CBS) and 1.7 times for Viacom (VIAB).
Currently, Walt Disney pays an annual dividend of $0.60 per share, for a yield of 1.2%.
Shares of Walt Disney have seen a great run up in 2012. Since January, shares have steadily risen some 30% without a meaningful correction.
After Walt Disney reported its second quarter results in May, I already indicated that I was a long-term holder of the shares. From that point in time, shares have roughly added another 10%. Shares traded at $50 in today's regular trading session, setting fresh all-time highs.
At the time in May, I indicated that I like the strong operational results, the diversified business model, and the strong adoption in Asia. Combined, these developments provide highly visible earnings growth in the coming years. After yesterday's earnings report, I simply reiterate my long stance.