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Will Disney's (DIS) Box Office Success Offset ESPN Woes?
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Media behemoth, The Walt Disney Company (DIS - Free Report) has been riding high on its box-office hits, impressive performance of the Parks & Resorts division and BAMTech deal. Though these positives inspire optimism, factors like falling subscriber base and higher programming costs at ESPN, dismal top-line performance and currency headwinds raise concerns.
Hidden Catalyst
Disney’s shares have gained nearly 21% in the past six months, which is almost in line with the Zacks categorized Media Conglomerates industry. Stellar box-office performance of Rogue One: A Star Wars Story helped the company set a new Hollywood record. Disney’s Studios touched $7 billion mark at the global box office in 2016, surpassing a collection of $6.89 billion in the previous year.
We note that fiscal 2016 has been a magnificent year for the company’s movie business. Four of its releases, namely, Star Wars: The Force Awakens, Captain America: Civil War, Finding Dory and Zootopia surpassed the $1 billion mark, each. Additionally, The Jungle Book did excellent business at the box office with worldwide collection of $966 million.
Disney’s Parks & Resorts division continues to impress investors. In first-quarter fiscal 2017, company reported growth in both international and domestic revenues. Opening of Shanghai Disney Resort in third-quarter fiscal 2016 and improved parks and resorts operations at both Disneyland Paris as well as Hong Kong Disneyland enhanced international theme parks business. Disney is focused on deploying capital toward expansion of the Parks and Resorts business, in turn, increasing market share and creating long-term growth opportunities.
Most of the media companies are failing to cope with "cord cutting" as consumers do not want to pay for large bundles of channels. Disney is striving to bring back ESPN’s golden days. In an effort to attract online viewers, the company has inked a deal with video streaming, data analytics and commerce management company – BAMTech. The company also has the option to acquire the majority stake in BAMTech in the future. BAMTech is expected to create an ESPN-branded, over-the-top video streaming service that will cover a variety of sports.
Hurdles to Cross
Over the past few quarters, Disney’s ESPN has been a hot topic in the media industry and investors are closely monitoring its performance. Continuing the dismal trend displayed in the past few quarters, ESPN disappointed investors in the fiscal first quarter. Falling subscriber base and higher programming costs at ESPN dragged down the company’s results in this quarter too. ESPN also witnessed a decline in average viewership and advertising rates, mainly due to lesser College Football Playoff games in the quarter. Fresh NBA agreement and increase in contractual rate for NFL programming resulted in the increase in overall programming cost for ESPN. Ad revenues of ESPN declined 7% during the quarter. Most of the media companies are failing to cope with "cord cutting" as consumers are unwilling to pay for large bundles of channels.
With its huge international presence, Disney remains prone to unfavorable foreign currency translations, which may have an adverse impact on its top- and bottom-line results. This time around, management cautioned that lack of hedges at favorable rates against forex volatility will drain $175 million from the company’s fiscal 2017 operating income.
Another issue that Disney needs to address is its weaker-than-expected top line for the second straight quarter, primarily due to dismal performance by Media Networks.
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Will Disney's (DIS) Box Office Success Offset ESPN Woes?
Media behemoth, The Walt Disney Company (DIS - Free Report) has been riding high on its box-office hits, impressive performance of the Parks & Resorts division and BAMTech deal. Though these positives inspire optimism, factors like falling subscriber base and higher programming costs at ESPN, dismal top-line performance and currency headwinds raise concerns.
Hidden Catalyst
Disney’s shares have gained nearly 21% in the past six months, which is almost in line with the Zacks categorized Media Conglomerates industry. Stellar box-office performance of Rogue One: A Star Wars Story helped the company set a new Hollywood record. Disney’s Studios touched $7 billion mark at the global box office in 2016, surpassing a collection of $6.89 billion in the previous year.
We note that fiscal 2016 has been a magnificent year for the company’s movie business. Four of its releases, namely, Star Wars: The Force Awakens, Captain America: Civil War, Finding Dory and Zootopia surpassed the $1 billion mark, each. Additionally, The Jungle Book did excellent business at the box office with worldwide collection of $966 million.
Disney’s Parks & Resorts division continues to impress investors. In first-quarter fiscal 2017, company reported growth in both international and domestic revenues. Opening of Shanghai Disney Resort in third-quarter fiscal 2016 and improved parks and resorts operations at both Disneyland Paris as well as Hong Kong Disneyland enhanced international theme parks business. Disney is focused on deploying capital toward expansion of the Parks and Resorts business, in turn, increasing market share and creating long-term growth opportunities.
Most of the media companies are failing to cope with "cord cutting" as consumers do not want to pay for large bundles of channels. Disney is striving to bring back ESPN’s golden days. In an effort to attract online viewers, the company has inked a deal with video streaming, data analytics and commerce management company – BAMTech. The company also has the option to acquire the majority stake in BAMTech in the future. BAMTech is expected to create an ESPN-branded, over-the-top video streaming service that will cover a variety of sports.
Hurdles to Cross
Over the past few quarters, Disney’s ESPN has been a hot topic in the media industry and investors are closely monitoring its performance. Continuing the dismal trend displayed in the past few quarters, ESPN disappointed investors in the fiscal first quarter. Falling subscriber base and higher programming costs at ESPN dragged down the company’s results in this quarter too. ESPN also witnessed a decline in average viewership and advertising rates, mainly due to lesser College Football Playoff games in the quarter. Fresh NBA agreement and increase in contractual rate for NFL programming resulted in the increase in overall programming cost for ESPN. Ad revenues of ESPN declined 7% during the quarter. Most of the media companies are failing to cope with "cord cutting" as consumers are unwilling to pay for large bundles of channels.
With its huge international presence, Disney remains prone to unfavorable foreign currency translations, which may have an adverse impact on its top- and bottom-line results. This time around, management cautioned that lack of hedges at favorable rates against forex volatility will drain $175 million from the company’s fiscal 2017 operating income.
Another issue that Disney needs to address is its weaker-than-expected top line for the second straight quarter, primarily due to dismal performance by Media Networks.
Given the above factors, Disney, which shares space with Twenty-First Century Fox, Inc. (FOXA - Free Report) , Time Warner Inc. and Comcast Corporation (CMCSA - Free Report) , carries a Zacks Rank #3 (Hold) at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
5 Trades Could Profit ""Big-League"" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>