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ETFs in Focus on Walt Disney's Q1 Earnings Beat

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Shares of The Walt Disney Company (DIS - Free Report) gained more than 2.9% in after-hours trading on Feb 6, immediately after it reported an earnings and revenue beat in first-quarter fiscal 2018. The company reported a year-over-year increase of 4.0% in net quarterly revenues.

Fiscal Q1 Performance

Walt Disney reported non-GAAP earnings per share of $1.89, beating the Zacks Consensus Estimate of $1.62 and the year-ago figure of $1.55. Revenues of $15.351 billion also beat the consensus mark of $15.244 billion.

Free cash flow increased to $1.256 billion from $405 million in the year-ago quarter. However, capital expenditures decreased to $981 million compared with $1.04 billion a year ago.

From a tax perspective, the company registered a 52.6% change in effective tax to -19.4% from 33.2% in the year-ago quarter. This was primarily due to a benefit of $1.6 billion, owing to remeasuring deferred tax assets and a reduction in the company’s 2018 statutory tax rate to 24.5% from 35% in the prior fiscal.

Segmental Performance

Media Networks reported operating revenues of $6.243 billion, increasing from $6.233 billion a year ago. Moreover, segment income amounted to $1.193 billion, down from $1.362 billion a year ago. Per the company’s news release, results were affected by lower advertising revenues for ESPN. Moreover, wider losses from equity investments in BAMTech LLC weighed on the segment’s performance.

Parks and Resorts reported operating revenues of $5.154 billion, increasing from $4.555 billion a year ago. Moreover, segmental income amounted to $1.347 billion, increasing from $1.110 billion a year ago. Increased guest attendance and spending both domestically and internationally led to the upside. Moreover, lower base effect due to hurricanes in the prior-year quarter also had a positive impact on the segment’s performance domestically.

Studio Entertainment reported operating revenues of $2.504 billion, decreasing from $2.520 billion a year ago. Moreover, segment income amounted to $829 million, decreasing from $842 million a year ago. Decreases in home entertainment and TV/SVOD distribution results weighed on the segment’s performance, whereas impressive results in theatrical distribution helped pare some losses.

Consumer Products & Interactive Media reported operating revenues of $1.450 billion, down from $1.476 billion a year ago. Moreover, segmental income amounted to $617 million, down from $642 million a year ago. The poor performance of the merchandise licensing business and retail business weighed on the segment’s results, whereas the games business helped pare some losses.

Walt Disney holds a Zacks Rank #3 (Hold) and has lost 3.1% in a year.

In the current scenario, we believe it is prudent to discuss the following ETFs that have a relatively high exposure to Walt Disney.

Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report)

This fund seeks to provide exposure to the Consumer Discretionary industry. It has AUM of $12.7 billion and charges a fee of 13 basis points a year. The fund has 5.4% exposure to Walt Disney (as of Feb 6, 2018). The fund returned 24.2% in a year and 4.4% in the year-to-date time frame (as of Feb 6, 2018). It has a Zacks ETF Rank #3 (Hold), with a Medium risk outlook.

Vanguard Consumer Discretionary ETF (VCR - Free Report)

This fund has AUM of $2.5 billion and is a relatively cheap bet to play the consumer discretionary sector, as it charges a fee of 10 basis points a year. The fund has a 4.8% exposure to Walt Disney (as of Dec 31, 2017). The fund returned 23.3% in a year and 3.5% in the year-to-date time frame (as of Feb 6, 2018). It has a Zacks ETF Rank #3, with a Medium risk outlook.

Fidelity MSCI Consumer Discretionary Index ETF (FDIS - Free Report)

This fund has AUM of $457.3 million and is one of the cheapest bets to play the consumer discretionary sector, as it charges a fee of just 8 basis points a year. The fund has a 4.5% exposure to Walt Disney (as of Feb 5, 2018). The fund returned 23.5% in a year and 3.3% in the year-to-date time frame (as of Feb 6, 2018). It has a Zacks ETF Rank #3, with a Medium risk outlook.

Below is a chart comparing the year-to-date performance of the funds and Walt Disney.

Source: Yahoo Finance

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