Disney Doesn’t Let John Carter Steal Its Magic

Late Tuesday, The Walt Disney Co. (NYSE:DIS) reported financial results for the fiscal second-quarter. Once again, the media conglomerate demonstrated its strength as a blue chip company. For investors considering a media position, Disney is worth a look.

Disney’s net income jumped 21.3 percent to $1.14 billion (63 cents per share), compared to $942 million (49 cents per share) last year. The company reported adjusted net income of 58 cents per share, beating the mean estimate of 56 cents per share. Even more impressive, the quarter included the box office dud, John Carter. The lackluster performance of the film caused the majority of an $84 million operating income loss for the Studio division. However, the future looks bright for Disney.

“With 18 percent adjusted growth in earnings per share, we’re pleased with our second quarter performance,” said Robert A. Iger, Disney Chairman and CEO. “We’re incredibly optimistic about our future, given the strength of our core brands, Disney, Pixar, Marvel, ESPN, and ABC, and our extraordinary ability to grow franchises across our businesses, such as The Avengers, which shattered domestic box office records with a $207.1 million opening weekend for a global performance of more than $702 million to date.” On the company’s conference call, Iger also cited strong demand for Avengers’ merchandise and explained that the Disney-Marvel licensing team “is hard at work bringing those characters to the market in multiple ways.”

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Although fading media stars such as Netflix Inc. (NASDAQ:NFLX) may attract more attention and volatility, stable content providers such as Disney and CBS Corp. (NYSE:CBS) are taking center stage and staying there. Shares of Disney have increased 18 percent this year and almost 90 percent over the past three years. Meanwhile, CBS Corp. shares have gained 21 percent year-to-date and nearly 400 percent since 2009. Early Wednesday, Disney shares hit new 52-week highs just above $44.50.

Disney and CBS have topped analyst estimates for the past four quarters. Estimates for future quarters continue to increase as optimism builds. The average estimate for Disney’s fiscal third-quarter has increased to 91 cents per share, while analysts expect CBS to earn 60 cents per share.

Looking forward, Disney looks to be the best content provider to satisfy the C= ‘Catalyst for a Stock’s Movement’ in our CHEAT SHEET investing framework. In addition to The Avengers success being reported on the next quarter, the company has a long line-up of blockbusters to be released. Iger explains, “And we’ll continue to build on this incredible franchise with the release of Iron Man 3 and Thor 2 next year, followed by Captain America 2 in 2014. And since I’m sure I will be asked, yes, we are in development on a sequel to Avengers.”

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