Wall St. Speaks Out: The Walt Disney Company - Very Resilient Results

Disney39s results were ahead of expectations as adj EPS of 120 35 YoY beat our estimate by 005 Media networks were a positive highlight as segment operating income was driven by strength at ESPN The beat came despite the fact that much Star Warsrelated consumer products revenue will not be realized until the movie is released in December Disney reaffirmed its 3year Cable Networks guidance For FY16 EPS we believe favorable trends at the Studio and CP segments more than offset Shanghai launch costs SVOD compares and Hulu losses Our FY16 EPS goes to 553 from 550 This implies a healthy 7 EPS growth for Disney after a fiscal year in which it grew EPS 19 YoY We maintain our 21x target EPS multiple for Disney reasonable relative to the SampampP 500 and other consumer discretionary stocksStudio OI more than doubles in 4Q setting stage for further growth Driven mainly by cost improvements and lower content amortization Studio segment F4Q OI was significantly higher than our estimates We are modelling material upside in Q1 given the 121815 release of Star WarsTaking up our Consumer Products estimates Importantly because of an accounting rule that doesn39t call for some merchandise to be recognized until after the film is released there was no Star Warsrelated licensing revenue in the quarter With Star Wars 6 weeks away management alluded to huge global demand for Star Warsrelated merchandiseESPN affiliate growth ad sales above our estimates and pacing up nicely DIS reported upside to cable networks revenue which grew 12 in F4Q15 driven by recurring growth of 9 in ad sales and recurring affiliate fee growth of 8 Media Networks segment OI growth of 27 YoY may be comforting to those who are anxious about the traditional TV ecosystem Cable networks 3year operating income guidance was unchangedParks OI slightly below our estimate trends strong but planning for bigger launch costs in FY16 Given the extra week of operations we were surprised Disney OI results were slightly below in the quarter US resort reservations are pacing up 5 compared to prior year levelsFCF strong funding capex increases for new Parks projects FCF of 21bn for the quarter was up 4 YoY Disney dramatically increased capex expectation as 800mn this implies new capex guidance of 5bn well ahead of expectations heading into the call In terms of the buyback plan for next year Disney reiterated its plan for 6bn8bn of shareholder returnsMaintaining 121 TP We maintain our constructive view on Disney shares given the IP monetization potential across all its segments Our 121 TP is based on 21x our CY16 EPS estimate of 571CLICK BELOW TO ACCESS RESEARCH REPORTPRESENTATION including important disclosuresThe Walt Disney Company Very Resilient ResultsThe opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaVillagecom MyersBizNet Inc management or associated bloggers amp160amp160

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Wall St. Speaks Out: The Walt Disney Company - Very Resilient Results

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