Disney: Marvel Phase II And III Pave The Future

| About: The Walt (DIS)
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Back in 2009, media giant Disney (NYSE:DIS) purchased comic book company Marvel for $4 billion. Since that time, Disney has popped out several of its biggest blockbuster movies of all times. While revenue in studio and consumer product segments has already gotten a boost from the deal, the best could still be ahead for the company.

Here is a look at the current lineup:

· November 8, 2013: "Thor: The Dark World"

· April 4, 2014: "Captain America: The Winter Soldier"

· August 1, 2014: "Guardians of the Galaxy"

· May 1, 2015: "The Avengers 2"

· November 6, 2015: "Ant-Man"

· May 2016: "Unannounced Marvel Movie"

· May 2017: "Unannounced Marvel Movie"

Investors and comic book fans around the world are waiting to hear details for Phase III of Marvel's movie. One thing is certain, "The Avengers 3" is likely coming in 2017. This past week Marvel announced it had signed Robert Downey Jr. to reprise his role as Iron Man in "The Avengers 2" and "The Avengers 3". With the previous two Avengers movies being spaced two years apart, my guess is the May 2017 slot will be filled by "The Avengers 3". Consider that once again that year would produce an Avengers movie and "Star Wars VIII".

Signing Robert Downey Jr. was an absolute must for Disney. Consider that Downey Jr. starred as Iron Man in the two biggest domestic box office movie openings of all time. Recently released "Iron Man 3" became the second biggest domestic open of all time with $174.1 million. This trails only "The Avengers", which was released in 2012. "Iron Man 3" has gone on to gross $400.9 million in domestic markets and an additional $803.9 million in foreign markets. The movie's $1.20 billion total box office ranks the movie fifth all time.

In September 2013, fans of Marvel will get their first look at "S.H.I.E.L.D", the television show airing on ABC. The show will center on characters from Marvel and will give Disney a chance to test character developments and create origin stories that could lead to big screen adaptations if well received by viewers. The show should help milk box office revenue for future releases and also boost licensing and consumer product revenue along the way.

As if the release of "The Avengers 2" wasn't enough reason to get excited about Disney and Marvel in 2015, consider what else is in store. In 2015, Disney will also release the highly anticipated "Star Wars VII", which is also the result of a large acquisition. Other 2015 movies include a new "Pirates of the Caribbean" movie, an untitled Pixar film, and others to be announced. The release of "The Avengers 2" and "Star Wars VII" was the main reason I was so bullish on Disney in an article that discussed the blockbuster potential for 2015 in movie theaters.

From a financial stand point, Disney needs the Marvel movies to keep being successful. In fiscal 2012, studio revenue decreased 8% to $5.8 billion. Profits from the studio segment grew 17%, but represented only $700 million of the close to $10 billion in operating income. In comparison, the media ($19.4 billion) and parks ($12.9 billion) segment posted much larger revenue shares for Disney. The company's consumer division did grow 7% to $3.3 billion thanks in large part to Marvel's success.

Shares of Disney continue to go higher and higher. However, shares have cooled off from their recent highs of $67.89 and could be worth buying here below $63. Analysts are predicting Disney will post earnings per share of $3.47 in fiscal 2013. Revenue is expected to increase 6.9% to $45.2 billion. In fiscal 2014, analysts predict the company will post earnings per share of $3.94, with revenue increasing 6.3% to $48.0 billion. I am more bullish on shares and think the company could post double-digit revenue growth in fiscal 2014, 2015, 2016, and 2017 with the future of Marvel and Star Wars built in.

The continued expansion of the Marvel universe, along with the upcoming Star Wars trilogy and spin-offs, will power revenue going forward in multiple segments. The two acquisitions will boost media revenue with ABC shows based on both Marvel and Star Wars. Studio will see a large increase from the box office revenue of the future movies. Parks and resorts could see a boost from new rides and attractions or separate parks centered around Star Wars or Marvel characters, if Disney can work around the existing Universal Marvel deal. Consumer products will also see a large revenue boost from the new movies as more kids will be buying Marvel and Star Wars related merchandise than in recent years.

The time to buy stock may be before the Comic-Con Convention in San Diego (July 18 to July 21, 2013). At the Comic-Con Convention, Marvel may announce what movies will be coming in Phase III of its plans. Rumors include characters like Doctor Strange, Black Panther, and reboots. Marvel gained back the rights to Daredevil, The Punisher, and Blade. Marvel could announce a reboot to any of these popular characters, which could boost its pipeline and possibly bring investors back in for the long-term picture.

The other stock to watch going forward is Hasbro (NASDAQ:HAS). The toy giant has the licensing rights to Marvel characters and also Star Wars. Hasbro also signed a deal with Rovio for the rights to Angry Birds Star Wars. If anyone will benefit from the success of Disney's upcoming movie slate it is Hasbro. Marvel sales were up 20% in fiscal 2012 for Hasbro. Another benefit for Hasbro is its rights to other Marvel characters outside of Disney. For example, Hasbro makes Spider-Man toys, even though Spider-Man movies are made by Sony. Spider-Man toys will see a boost going forward, as Sony announced it is making three more Spider-Man films. Spider-Man toy sales were noted as particularly strong during the 2012 fiscal year presentation.

Going forward, Hasbro can beat analysts' expectations with strong sales from its Marvel line. In fiscal 2012, revenue decreased 2% to $4.19 billion. In the first quarter of fiscal 2013, revenue increased 2% to $663.7 million. Analysts seem to be bearish on the company going forward. Projections see the company increasing revenue by only 0.6% in fiscal 2013 and 3.7% in fiscal 2014. With a strong lineup of movies from Marvel, Hasbro should be able to top these numbers and see shares rise.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in DIS, HAS over the next 72 hours. 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.