Disney’s Fiscal 2015 Results

Performance Analysis

Disney’s fiscal 2015 results

On a full-year basis, Disney recorded $52.5 billion in revenue, a 7% increase over revenue recorded in 2014. Full-year net income jumped 12% to $8.4 billion, resulting in earnings of $4.90 per share. Excluding special items, the Mickey Mouse company recorded $5.15 in full-year earnings per share, a figure that marks a 19% increase over 2014’s earnings.

The company reported net income of $8.4 billion in fiscal 2015, a 12% increase year-over-year. Disney declared diluted EPS (earnings per share) of $4.90, an increase of 15% over fiscal 2014. The company’s diluted EPS for fiscal 2015, $4.90, fell short of consensus Wall Street analysts’ expectations of $5.09.

However, the company’s adjusted EPS of $5.15 in fiscal 2015 exceeded consensus Wall Street analysts’ expectations by 1%. Disney’s adjusted EPS excludes a $399 million write-off of a deferred income tax asset in fiscal 4Q15. The write-off pertained to the company’s increase in ownership of Euro Disney and a recapitalization of Disneyland Paris.

Disney recorded a free cash flow of $6.6 billion in fiscal 2015, a rise of 3% over fiscal 2014. Disney’s stock price has risen ~20% year-to-date. The SPDR S&P 500 ETF (SPY) tracks the S&P 500 Index. It gained only 2.2% year-to-date.

 *MarketWatch.com

The company attributed its results to a variety of factors – including, of course, the cash cow that is Frozen. Disney’s 2015 consumer products revenue surged 13% to $4.5 billion compared to 2014, thanks in no small part to the continued success of the Frozen line of goods. Disney also said that its fourth quarter 2015 consumer products revenue – which increased 11% to $1.2 billion – benefited from Frozen, a slightly remarkable feat considering the movie premiered a full two years ago.

On the broadcast and cable side of things, in the fourth quarter Disney’s media networks segment recorded $5.8 billion in revenue (up 12% year-over-year) and $1.8 billion in operating income (up 27% year-over-year). The company said that the growth was partially attributable to ESPN, which saw affiliate revenue growth that was driven by a “contractual rate increases and an increase in subscribers.” Broadcasting operating income was flat for the quarter, as growth in advertising and affiliate revenue was offset by higher programming costs.

Disney’s full-year media networks revenue grew 10% to $23.3 billion due to increased ad sales at ESPN and ABC Television Network. Though these increases were offset by a jump in programming and production costs at ESPN, the Disney Channels and ABC, the programming costs were not high enough to completely erase the ad-sale gains.

Media Networks

As the chart below shows, Disney’s (DIS) Media Networks segment was the biggest contributor to its revenue, at 44% or $52.5 billion, in fiscal 2015. The rise in revenues was driven by an increase in affiliate fees, higher advertising revenues at ESPN, and the ABC television network.

This segment recorded revenues of $23.3 billion in fiscal 2015, up 10% over fiscal 2014. Its operating income was $7.8 billion in fiscal 2015, up 6% over fiscal 2014.

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Studio Entertainment

This segment recorded revenues of $7.4 billion in fiscal 2015, a rise of 1% over fiscal 2014, contributing 14% to Disney’s total revenues in fiscal 2015. Its operating income was $1.9 billion in fiscal 2015, up 27% over fiscal 2014. The rise in operating income was because of an increase in revenue share from Frozen merchandise. This segment shares revenues from merchandise with Disney’s Consumer Products segment.

Consumer Products

This segment recorded revenues of $4.5 billion in fiscal 2015, up 13% over fiscal 2014. Operating income was $1.8 billion in fiscal 2015, up 29% over fiscal 2014. The growth in operating income was mainly driven by a rise in merchandise licensing revenue from Frozen, Avengers, and Star Wars merchandise.

Interactive

This segment recorded revenues of $1.2 billion in fiscal 2015, a decline of 10% from fiscal 2014. Its operating income was $132 million in fiscal 2015, up 14% over fiscal 2014. The growth in operating income was mostly driven by the Tsum Tsum mobile game.

Disney makes up 3.5% of the PowerShares Dynamic Large Cap Growth Fund (PWB). This ETF also invests 3.8% of its portfolio in Facebook (FB), 3.7% in Alphabet (GOOG), and 1.8% of Activision Blizzard (ATVI).

Analysis of Strategic Factors

Organizational Strategy

Organizational strategy is the creation, implementation and evaluation of decisions within an organization that enables it to achieve its long-term objectives. Organizational strategy also specifies the organization's mission, vision, and objective and develops policies and plans, often in terms of projects and programs, which helps in achieving the organization's objectives.