Disney reports record earnings but stock falls

[DSLRuser]

Somebody let the airlines know that fuel prices are low, please?

Airlines buy fuel in huge contracts years out. The low cost of oil now, will materialize in lower airfare 3-4 years in the future.

That is how southwest got so large in the early 2000's. They but 10 years worth of fuel in the 90's when it was still cheap. Thats why southwest is now back to being on par with other carriers. They all do it now and are all using fuel bought in the last 5 years or so when it was $100 a barrel.

 

[mcd2745]

The feds have allowed way too much consolidation in the airline industry. The airlines are now under federal investigation for things like collusion and other practices (such as acquiring slots at airports and not using them just to keep competitors from getting them) designed to keep prices inflated. I have little doubt that a lot of shady/illegal practices have been going on. I also have little doubt that the federal investigation will lead to nothing.


Edited to add a recent article:

http://www.nytimes.com/2016/02/07/b...-profits-and-passengers-get-peanuts.html?_r=0

 

[Eoghann]

So what could we glean from this, as far as what their next move might be re: ticket prices etc... Since they had good earnings, might they hold off, or where stocks are falling will they want to boost earnings?

Earnings aren't the problem. Expectations are the problem.

Wall Street will punish you not just for revenue below expectations but for revenue above expectations. Wall Street is lala land...

Disney has to find a way to manage expectations. They need to shore up non-ESPN revenue sources, but also acclimatize people to the inevitable decline for ESPN and show they have some new strategy.

 

[Eoghann]

ESPN, ABC, and other video channels are losing money at a huge rate. Projections show a 50% drop in revenue over the next 10 years. As the pay tv model changes, espn has to find a way to get a new revenue stream, or will not be able to continue to pay billions of dollars for rights to things like MLB and NFL.

ESPN isn't losing money. Its profits are in decline.

That's not a good thing but it's very, very different to losing money.

 

[DSLRuser]

ESPN isn't losing money. Its profits are in decline.

That's not a good thing but it's very, very different to losing money.

Agreed. But the drop in revenue trend is what is driving the stock downturn.

 

[lockedoutlogic]

Oil speculation should be illegal...

It encourages gross over production, consumption of oil...and that ain't good.

 

[lockedoutlogic]

Funny how earnings were yesterday and Iger is running around telling people the cameras are rolling on Star Wars 8 today...

What a funny coincidence

 

[Eoghann]

Agreed. But the drop in revenue trend is what is driving the stock downturn.

Yes but it's important to understand that a stock downturn doesn't actually mean there's anything wrong with the company. Apple's stock has been dropping too, but no one is going to argue it's anything other than hugely profitable. Stock prices don't actually have much to do with a companies profitability or even how well they are run.

The problem is that the Board of Directors who tend to have a substantial number of stock options in their portfolio and who are dependent on shareholder goodwill for their continued jobs can be panicked into making poor decisions when stock takes a hit. Decisions that may boost stock prices but aren't actually in the company's long term interests.

 

[lockedoutlogic]

Wow...dropped $4 today...

Disney stock isn't gonna be a good bet if they react everytime ESPN brings in less...
...they have no ability to stop that.

Sell that.

 

[DDLand]

Disney just took ownership of it operation, debt, and problems.

That pain hasn't even hit the books yet

Actually they've already completed their recapitalization plan, and Disney has secured their majority ownership. They're working to reduce debt longterm and have begun simplifying their accounts and freeing up capital. The pain you're talking about isn't all that significant. They'll probably have some short term troubles, but they're used to that on the international stage. Disney has been struggling in those two since the beginning.

They will have to increase the quality and volume of the draws and likely reduce prices to make it a success longterm. Think they're up for that?

Yes. Look at Hong Kong. Look at DCA. Look at DAK. They've learned that quality matters. Strong rosters matter.

Do you think that they didn't realize that it would be challenging and expensive to fix Paris? After over 20 years that they had no idea that what they were getting themselves into?

You know they're not the kind to throw around hundreds of millions without first thinking. They will fix Paris because they have every incentive to fix it.

Think about how much of a travesty it is that Paris isn't contributing to the bottom line. Europe is a wealthy population base of hundreds of millions of individuals, and it's a negative on the balance sheet. That's embarrassing. Of any Disney Resort besides Shanghai, it's actually the most logical to be doing great do to its central location among a more dense population than WDW or Disneyland.

I'd expect great things from Paris. Just like Shanghai. Domestic has been carrying far too much weight. It's time to balance that out.

 

[lockedoutlogic]

I think the longterm health of Paris is dependent on an EU economy that is likely never to recover significantly.

Who's gonna buy the tickets?

 

[DDLand]

I think the longterm health of Paris is dependent on an EU economy that is likely never to recover significantly.

Who's gonna buy the tickets?

Not to get too technical on my views on that...

People have proven pretty resilient with their vacation plans and buying. I wouldn't be shocked if Disneyland Paris never becomes Disney World sized, but there are enough affluent people in Germany, the United Kingdom, Spain, France, Switzerland, Italy, and the Nordic Nations, etc. to support a vacation destination with a MK Castle park reaching the high teens of attendance and having thousands of more hotel rooms available and booked. They should be able to support a meaningful park two and maybe three.

Disneyland Paris turned off a lot of people by comparing unfavorably with WDW. Now is their opportunity to make meaningful improvements.

 

[Eoghann]

Not to get too technical on my views on that...

People have proven pretty resilient with their vacation plans and buying. I wouldn't be shocked if Disneyland Paris never becomes Disney World sized, but there are enough affluent people in Germany, the United Kingdom, Spain, France, Switzerland, Italy, and the Nordic Nations, etc. to support a vacation destination with a MK Castle park reaching the high teens of attendance and having thousands of more hotel rooms available and booked. They should be able to support a meaningful park two and maybe three.

Disneyland Paris turned off a lot of people by comparing unfavorably with WDW. Now is their opportunity to make meaningful improvements.

While the European economy is not as strong as it once was, it's not all Greece either. Plenty of people take vacations and in general Europeans have more vacation time than Americans.

Disneyland Paris problem has always been that it looked and felt like a copy... Why go there when you could go to the real thing?

 

[jade1]

Airlines buy fuel in huge contracts years out. The low cost of oil now, will materialize in lower airfare 3-4 years in the future.

That is how southwest got so large in the early 2000's. They but 10 years worth of fuel in the 90's when it was still cheap. Thats why southwest is now back to being on par with other carriers. They all do it now and are all using fuel bought in the last 5 years or so when it was $100 a barrel.

Great, in 4 years they will have 10 years worth of $25 oil.

 

[jade1]

Somebody let the airlines know that fuel prices are low, please?

Came back today, $48 Sun country direct (bought it 2 weeks ago), already had a $60 Spirit we went direct to MCO on last week.

Last week we bought $81 round trip direct for the first week of March.

 

[DDLand]

While the European economy is not as strong as it once was, it's not all Greece either. Plenty of people take vacations and in general Europeans have more vacation time than Americans.

Disneyland Paris problem has always been that it looked and felt like a copy... Why go there when you could go to the real thing?

That's the problem isn't it. Many UK and European Tourists can fly across the Atlantic and experience the full fledged item. Warm sunny weather too. Add some Florida beach time and round out a compelling option. I know I'd be looking pretty hard between a WDW and DLP vacation. Of course DLP still wins on proximity, and if they can execute on repairing the park there's a whole lot of potential.

That's a thought provoking point you bring up though. Makes you wonder why they went for a mediocre copy of DHS for park two. I know, cheapness... But if differentiation was key, why do something that would be compared to WDW? Why not bring something original to the table? The plan for a Hollywood Studios park were in place from day one of DLP. They were highly concerned with differentiating their castle park, why not extend that further?

I'm hoping we start to see logical decision making on first fixing/maintaining, but ultimately expanding the resort also. I'm excited to see the 2017 CapEx. Shanghai will be finished and we'll truly get to see Hong Kong and Paris's future.

 

[mshanson3121]

Came back today, $48 Sun country direct (bought it 2 weeks ago), already had a $60 Spirit we went direct to MCO on last week.

Last week we bought $81 round trip direct for the first week of March.

And how much were the taxes and luggage fees on top of that?

 

[lockedoutlogic]

http://investorplace.com/2016/02/walt-disney-co-dis-stock/#.VryVwew8KnM

 

[jade1]

And how much were the taxes and luggage fees on top of that?

That's with tax, Sun Country was free carry on.

Just checked, $51 direct from MPLS to MCO Sun after next. Tax and fees included.