Disney's Streaming Growth Driver - ESPN/Disney+/Hulu

Disney (DIS) just delivered a stellar quarter beating on both the top and bottom lines while continuing to roll out its growth initiatives. Disney’s growth rotation is still in its early stages with the remediation of its ESPN property and flurry of growth initiatives to meet modern-day media consumption trends via streaming with its Disney+ property. In the backdrop, the company continues to dominate the box office year after year with a long pipeline of blockbusters in the queue, notably Frozen 2 and Star Wars: The Rise of Skywalker. Additionally, its Parks and Resorts continue to be a growth avenue with tremendous pricing power. Disney is going all-in on the streaming front and will inevitably acquire full ownership of Hulu, and the company is launching its Disney branded streaming service that will compete directly with Netflix (NFLX). Disney+ launches on November 12th, and Disney is unleashing all of its content (Marvel, Star Wars, Disney, and Pixar), which will be a formidable competitor in the ever-expanding streaming wars. As a result of its strong Q4 numbers, Disney has hit near all-time highs of ~$140 per share. I’ve been behind Disney for a long time, especially through this transition back to growth when the stock traded below $100, and I still feel that the company offers a compelling long-term investment opportunity given its growth catalysts that will continue to bear fruit over the coming years.

Disney’s Stellar Q4 Earnings

Disney’s Q4 earnings easily beat analysts’ expectations with substantial gains in its television networks and film studio by way of its Fox acquisition. Disney beat on both the top-line revenue and bottom-line profit. EPS came in at $1.07, beating by $0.10 per share, and revenue came in at $19.1 billion, beating by $80 million. Revenue grew by 34% year-over-year, and for the fiscal year, revenue was up 17% at $69.57 billion.

Disney’s business across the board came in strong, posting growth in every category. Revenue by segment: Media Networks, $6.51 billion (up 22%); Parks, Experiences and Products, $6.7 billion (up 8%); Studio Entertainment, $3.3 billion (up 52%); Direct-to-Consumer and International, $3.4 billion (up 361%). Operating income by segment: Media Networks, $2.14B (up 7%); Parks, Experiences and Products, $1.7B (up 4%); Studio Entertainment, $792M (up 13%); Direct-to-Consumer and International, -$553M. Continue reading "Disney's Streaming Growth Driver - ESPN/Disney+/Hulu"

Hasbro Sinks 17% - Tariffs Negatively Impact Q3 Results

So much for Hasbro (HAS) allegedly having a diverse, flexible format supply chain and migrating its legacy supply chain out of China. Per Brian Goldner, “the threat and enactment of tariffs reduced revenues in the third quarter and increased expenses to deliver product to retail.” Needless to say, the stock sank 17% after reporting its Q3 results. I feel that management was remiss when they forecasted their ability to circumvent the tariffs and then used the tariffs as a scapegoat to justify the company missing its numbers on both top-line revenue and bottom-line profit.

With that being said, the company is in a solid-state moving into the holiday season, historically their biggest quarter, with blockbusters and the holidays coming into fold. Hasbro has its Disney toy licensing deal (Marvel, Star Wars, and Disney Princess lines) that should have a strong showing with Frozen 2 and the new Star Wars film debuting in Q4. Hasbro Studios (Transformers’ Bumblebee, My Little Pony, Power Rangers), E-Sports (Dungeons and Dragons and Magic: The Gathering), it's legacy games (Monopoly and Nerf) and acquisition of Entertainment One earlier this year places the company in a position of strength. Hasbro is fully committed to returning value to shareholders via a combination of share buybacks and dividend payouts. Hasbro has a compelling future across its portfolio with many catalysts in the near and long-term time horizons. The Toys 'R' Us fallout is now in the rearview while the company continues to layer-in growth initiatives.

Q3 2019 Earnings – Disappointing

Hasbro missed on both EPS and revenue coming in at $1.84 (missing by $0.36) and $1.58 billion (missing by $130 million), respectively. The previous two-quarters Hasbro beat estimates handily, and the stock broke through the $120 per share threshold as a result. This quarter, the company lost momentum and is attempting to attribute this to the tariffs.

“Hasbro remains on track to deliver profitable revenue growth in 2019, behind innovation in gaming, toys, and around Hasbro's Brand Blueprint. However, as we've communicated, the threat and enactment of tariffs reduced revenues in the third quarter and increased expenses to deliver product to retail," said Brian Goldner, Hasbro’s chairman and chief executive officer. "The team drove continued growth in the Wizards of the Coast gaming brands, MAGIC: THE GATHERING and DUNGEONS & DRAGONS, and delivered significant new holiday initiatives. To start the fourth quarter, we are seeing a strong consumer response to the global launch of Hasbro's line for Disney's Frozen 2 and Star Wars: The Rise of Skywalker as well as the U.S. launch of the new NERF Ultra." Continue reading "Hasbro Sinks 17% - Tariffs Negatively Impact Q3 Results"

Disney: Premature Overzealous Sentiment

Disney (DIS) ran too far, too fast prior to its recent earnings announcement that fell short of investors' overzealous expectations this early in the company's transformation. Disney's growth rotation is still in its early stages with the remediation of its ESPN property and flurry of growth initiatives to meet modern-day media consumption trends via streaming. In the backdrop, the company continues to dominate the box office year after year with a long pipeline of blockbusters in the queue. Additionally, its Parks and Resorts continue to be a growth avenue with tremendous pricing power. Disney is going all-in on the streaming front and will inevitably acquire full ownership of Hulu, and the company is launching its Disney branded streaming service that will compete directly with Netflix. I've been behind Disney for a long time, especially through this transition back to growth when the stock traded below $100 and I still feel that the company offers a compelling long-term investment opportunity given its growth catalysts that will continue to bear fruit over the coming years.

Disney's Q3 Earnings Fell Short

Disney's Q3 earnings fell short of analysts' expectations, which have become overzealous as of late with all of the company's initiatives resonating with investors and analysts alike. Disney missed on both the top-line revenue and bottom-line profit. EPS came in at $1.35, missing by $0.39 per share and revenue came in at $20.24 billion, missing by $1.16 billion. Disney's business across the board came in strong, posting growth in every category. Revenue by segment: Media Networks, $6.71B (up 21%); Parks, Experiences and Products, $6.6% (up 7%); Studio Entertainment, $3.84B (up 33%); Direct-to-Consumer and International, $3.86B (up from $827M). Operating income by segment: Media Networks, $2.14B (up 7%); Parks, Experiences and Products, $1.7B (up 4%); Studio Entertainment, $792M (up 13%); Direct-to-Consumer and International, -$553M.

"Our third-quarter results reflect our efforts to effectively integrate the 21st Century Fox assets to enhance and advance our strategic transformation". "I'd like to congratulate The Walt Disney Studios for reaching $8 billion at the global box office so far this year--a new industry record--thanks to the stellar performance of our Marvel, Pixar and Disney films. The incredible popularity of Disney's brands and franchises positions us well as we launch Disney+, and the addition of original and library content from Fox will only further strengthen our direct-to-consumer offerings."
- Bob Iger, CEO of Disney

Expectations were too high at this point in Disney's business transformation, and the realization of these financial benefits will require patience. Continue reading "Disney: Premature Overzealous Sentiment"

Hasbro's 52-Week High: Well, That Was Easy

Hasbro (HAS) is fresh off Q2 2019 earnings after turning the corner and going on the offensive with a slew of revenue verticals and end markets. Hasbro has its Disney toy licensing deal (Marvel, Star Wars and Disney Princess lines), Hasbro Studios (Transformers’ Bumblebee, My Little Pony, Power Rangers), E-Sports (Dungeons and Dragons and Magic: The Gathering) and reinventing its legacy games (Monopoly and Nerf) while driving newer products (Beyblades). Hasbro blew out expectations for its Q1 2019 earnings and the stock jumped 16%, breaking out above the $100 threshold, a level that hadn’t seen in over 6 months. This was followed up with its recent Q2 2019 earnings that blew away investors and the stock jumped 9% to all-time highs of over $120 per share.

Hasbro has set the post-Toys-R-Us bankruptcy narrative and laid out a business roadmap for long term profitable growth across its brands. Hasbro has had the tough task of getting out in front of the Toys-R-Us bankruptcy and working its way through the glut of merchandise. This sentiment has been bolstered by positive commentary from its CEO that the company has effectively absolved itself of the Toy R Us related bankruptcy headwind. All of this, while being fully committed to returning value to shareholders via a combination of share buybacks and dividend payouts. Hasbro has a compelling future across its portfolio with many catalysts in the near and long-term time horizons. As this turn-around was unfolding, the previous two quarters weren’t a surprise considering the year-over-year comparisons were in the midst of the Toys-R-Us fallout while the company layered-in several growth initiatives. This recent 6-month run in the stock was... well, easy!

Q1/Q2 2019 Earnings Blowouts

Hasbro posted an unexpected profit for Q1 with EPS coming in at $0.32 against expectations of -$0.11, beating estimates by $0.32 per share. Revenue also came in much higher than expected with $732.5 million and beating estimates by 66.5 million. Q2 numbers were impressive as well, EPS came in at $0.78 against expectations of $0.28, beating estimates by $0.28 per share. Revenue beat expectations as well, coming in at $984.5 million (year-over-year growth of 9%), beating Wall Street estimates by $25.6 million (Figure 1). Continue reading "Hasbro's 52-Week High: Well, That Was Easy"

All-Time High - Growth Initiatives Propelling Disney

Disney (DIS) has broken out to all-time as their growth initiatives are beginning to bear fruit with Wall Street embracing its growth strategy and rewarding shares with a higher price-to-earnings multiple. Disney is firing on all cylinders; posting one record-setting blockbuster after another, wrestling away full ownership of Hulu, launching a branded streaming service, record revenue numbers via pricing power at its Parks and Resorts and remediation of its ESPN franchise with ESPN Plus. Disney’s Avengers: Endgame is taking the torch beyond the $2 billion box office milestone, a feat that’s only been accomplished four times, one of them being Avengers: Infinity War last. Endgame has its sights set on surpassing Avatar as the highest grossing movie of all-time. All the initiatives that Disney has taken over the previous few years to restore growth appear to be coming to fruition, namely it's Fox acquisition, and it's streaming initiatives. Disney continues to invest heavily into its streaming services (Hulu, ESPN Plus, and its Disney branded streaming service) to propel its growth and presence within this space. ESPN Plus launched less than a year ago and already has over 2 million subscribers. The company is evolving to meet the new age of media consumption demands of the modern consumer via streaming and on-demand content. I’ve been behind Disney for a long time, especially through this transition back to growth when the stock traded below $100 and I still feel that the company offers a compelling long-term investment opportunity given its growth catalysts that will continue to bear fruit over the coming years. However, given that the shares are at all-time highs in the backdrop of the longest bull market in history, caution is prudent.

New Star Wars Land

Disney has finally launched its much anticipated Star Wars: Galaxy's Edge at Disneyland in Anaheim, CA, with a dedication ceremony. The festivities included CEO Bob Iger and Star Wars legends including creator George Lucas and stars Mark Hamill, Billy Dee Williams, and Harrison Ford.

“Isn’t this fantastic?” Iger said as he came out in front of the full-scale Millennium Falcon. “I have been in this job for 14 years. There are some good days, but this is right up there with the best of them.” Continue reading "All-Time High - Growth Initiatives Propelling Disney"