Disney First Quarter Earnings

[jcb]

Here's a huge shocker: Star Wars drove record quarterly earnings for Disney.
https://ditm-twdc-us.storage.googleapis.com/q1-fy16-earnings.pdf

Also: "Strong domestic performance resulted in 22% operating income growth at Parks and Resorts."

And on the TV front, ESPN is doing better. Disney got the message about cord cutting. Iger addresses the issue up front, even if he is maintaining that less people are wanting to cord cut.

 

[jcb]

Staggs is now talking about past Parks CapEx (going back to Cars Land). Star Wars is already showing a benefit to Parks. Mentions the DCL cruise. When they talk about past CapEx, you can expect Theme Park spending on Star Wars, Toy Story and Avatar to be significant.

 

[Princess Jes]

I love your live postings of the earnings call Jack!!
Thanks for keeping us updated

 

[jcb]

Attendance at domestic parks was up 10 percent. Spending up 7 percent up (higher ticket prices). 92 percent occupancy rate at domestic resorts, up 3 percent. (That's huge.)

 

[jcb]

UBS question: can it get any better than this? What opportunities for growth are there?
Iger: expect ESPN to deliver bottomline growth. Not going to give guidance on parks, film and consumer products but they are still growing (SW and Marvel, as well as Pixar and animation). Expected SW to cannibalize other consumer product segments but it didn't.
Parks growth is Avatar and SW.
Expects expansion in other platforms from IP.

 

[jcb]

ESPN question. Wanting clarification of prior answer Iger made in August on cord cutting that caused stock drop. Blames August answer on Neilsen.
Stupid question: Will SW look like Frozen in terms of growth.
Iger: SW is one of strongest franchise in the world. Strong before movie with consumer products (can you say BB-8?).

 

[jcb]

JP Morgan: Parks question: Great quarter at domestic parks. How much longer will it continue? Will it continue through the year with all the components?

Staggs: SW land and Avatar. Cadence of new attractions domestically. Seeing strong room nights, so looking at expanding hotel capacity down the road. Talks about Shanghai.

 

[jcb]

Merrill Lynch: Seems to be an insatiable demand for domestic theme parks. How different will Chinese consumers be?
Staggs: Expect Shanghai to resonate with local consumers very well. Designed the park, layout and food, scripting of shows, for Chinese consumers. Confident it will resonate. (That's two musical references.)

 

[jcb]

Credit Suisse. Hulu question. Current thinking?
Iger: Bullish on Hulu. Appeals to Millennials (yes, he used that word). Thinks Hulu will grow and it fits into Disney strategy to support new distribution opportunities.
What are Shanghai start up costs for quarter.
Christine McCarty (CFO): preopening will be 300 million in costs, look for it in June. Will impact overall results for year due to opening time.

 

[jcb]

Sanford Bernstein: With 14 percent growth since 2009 (total growth) should we think about Disney as high single grower or into double digits.
Iger: "You should think nothing but happy thoughts about this company." Not going to go into more specifics than that. Important to look a profile of the company. Four businesses are going to deliver growth. Not too long ago, only saw growth from two segments. Studios were "lumpy" in past growth. Expect bottom line contributions from segments will be more consistent than they were in the past.
Q. Parks risks due to the next recession.
Iger: Not going to say anything about this beyond what he has said already.

 

[jcb]

SBR Foreign markets question. (Final question) - how are you growing sports?
Staggs: advertising looks good. Keep in mind that as new sports contracts kick in, that will sometimes cause a shift in how growth is coming.

Note: pardon the misspellings, I'll clean those up later, if possible.

 

[Princess Jes]

Q. Parks risks due to the next recession.

I've been hearing a bit about this recently... Is this actually something that's expected to occur? How quickly do people think this recession will hit?
I can see the CDN$ is already quite poor, which I assume will cause issues with spend from them, especially in the travel segment, but what are the signs pointing to another recession?

 

[jcb]

One other note. After Iger answered the question about the August statements made regarding the impact on ESPN of cord cutting, McCarthy (a question or two later) specifically noted that Disney did not feel it needed to change any of the prior statements.

Without at all questioning McCarthy's competence, I suspect Disney's lawyers were listening, I mean, of course they were listening, but they probably had a direct pipeline to McCarthy.

 

[jcb]

I've been hearing a bit about this recently... Is this actually something that's expected to occur? How quickly do people think this recession will hit?
I can see the CDN$ is already quite poor, which I assume will cause issues with spend from them, especially in the travel segment, but what are the signs pointing to another recession?

No one expects the Spanish recession.
But you are right, we are in a global economy. Chinese market fluctuations make U.S. investors nervous and they run out and buy commodities. But then, everything makes investors nervous. I hear more about fluctuation than I do recession. Given what happened in 2008, however, a recession could happen without warning, almost overnight. Not to get political, but we have not taken steps to prevent what happened in 2008 from re-occuring.

 

[OKW Lover]

Thanks for the running commentary Jack. The "funny" thing is that despite the record revenues and earnings, the stock is down ~2% in after-market trading. SMH.

 

[pjweaver]

So what I learned from all of this is that park tickets are going up soon, resort and food prices will be going up too, and attendance at WDW will still remain high.

 

[jcb]

Thanks for the running commentary Jack. The "funny" thing is that despite the record revenues and earnings, the stock is down ~2% in after-market trading. SMH.

Probably because (1) Staggs brought up CapEx spending without any question being asked about it and (2) investors can't imagine Disney can keep up the double digit growth.
But as Iger said: "You should think nothing but happy thoughts about this company."

 

[jcb]

So what I learned from all of this is that park tickets are going up soon, resort and food prices will be going up too, and attendance at WDW will still remain high.

Don't forget about the statement that Disney is considering expanding hotel capacity. That's got to be more than building swank DVC properties along Bay Lake or Seven Seas Lagoon. More resorts = greater attendance.

So here's the reasoning: Staggs mentioned (without prompting) past significant CapEx projects that drove incredible revenue and attendance for the parks. Disney is considering building new hotel properties domestically. Disney is about done spending on Disney Shanghai (they are in the start up cost phase and to Disney $300 million is Dumbo peanuts). Therefore, Disney is going to announce a fifth gate in WDW and a new gate in DLR. It has to put the additional guests somewhere besides a galaxy far, far, away.

 

[rteetz]

Thanks for the running commentary Jack. The "funny" thing is that despite the record revenues and earnings, the stock is down ~2% in after-market trading. SMH.

Thank cable cutters for that.

 

[pjweaver]

Keep an eye out for large land purchases somewhere in the midwest. Why open a fifth gate when an entire new "world" can be bourn?
edit: I started typing this as a joke, but now see it as an actual option for Disney with China ready. I was also informed today that I can not joke.