Walt Disney Co. (NYSE:), which is better, known as an entertainment powerhouse has been in the news for its acquisition of LucasFilm and the box office successes of films like Iron Man 3. Though it is true that these along with its other acquisitions and investments in the box office space will help increase revenue growth in the coming year, box office revenue is by no means the only, or even the major, contributor to the rise in Disney's revenues. As we shall see below the company has been making significant profits from its theme parks, as well, these, along with a decent balance sheet may well give DIS a fairytale run in 2014.Image credit: iqoncept / 123RF Stock Photo
LucasFilm and other box office developments
Following the December 2012 acquisition of LucasFilm (the producer of Star Wars series), many had wondered whether Disney would take home its point regarding critical business elements, especially costs, at LucasFilms. When word went around at the beginning of Q2 2013 that the company was preparing for layoffs at some of its - and LucasFilm's studios, the markets got the evidence they needed.
Further, we heard recently that the company had signed an agreement with Paramount Pictures. The terms remain undisclosed, but it is clear that the agreement will provide Disney with the distribution rights for the Indiana Jones franchise and the ability to make subsequent movies of this franchise on its own terms.
The company's greatest box office releases for 2013, Iron Man 3 and The Lone Ranger, have performed decently (though the latter was regarded a flop by some), raking in $1.3 billion and $900 billion worldwide respectively.
Disney's other business segments
Although the above are certainly positive indicators for the future the company's revenue growth in its studio entertainment division, has grown by only 3% YoY. On the other hand, Disney's latest 10-K report estimates about 99 million subscribers each for the ESPN network and domestic Disney Channel. Add to these the subscriber base of 172 million for its Disney Channel and one can understand why the company's revenue in this segment has grown by a healthy 5% YoY. The company has also signed a deal with Netflix (NYSE:) for 2015 which will see the company develop four series of TV programs featuring Marvel characters for Netflix. It has also acquired a 50% stake for $500 million in Indian TV company UTV, which will allow it to reap the benefits of an expanding Indian media space.
Further, the company has a full version of the Club Penguin MMO for iOS. Considering that Apple (NYSE:) usually does not allow the app developers to market apps with a subscription model, this app will probably go a long way in increasing Club Penguin's popularity and as a result, DIS's revenues.
Finally, the company has been focusing on its theme parks, with a theme park in China currently being constructed. The existing parks in Tokyo and Hong Kong have seen record footfalls this year, thereby improving Disney's income from this segment.
The vital figures
DIS's growth for the fourth quarter was 7% over the year, beating analysts' estimates of $11.45 billion to reach $11.57 billion. Among the various segments, growth was strongest in consumer products (14%) and from parks and resorts (8%). The EPS growth for the fourth quarter was 13%, again beating market predictions. These statistics allowed DIS to end the year with EPS growing 8% to $3.38 and revenues 7% to $45.04 billion.
The investor's decision
Disney seems to be making all the right moves, be it in acquisitions or expansion of existing franchises. Considering the fact that the entertainment industry is set to grow rapidly in Asia, Disney's moves in China and India appear significant. Further, the acquisitions and agreements in the US market will likely bring the company a sizeable harvest in the coming year and after. Put together with the great balance sheet figures, Disney appears to be a strong "buy" for investors seeking a stock with strong growth potential while those who already have the company's stock in their portfolio would be clearly advised to "hold" for now.