The Earnings Power of the Magic Kingdom
If you wished upon a star that your child or grandchild would have a successful and financial secure future, you'd buy them at least one share of Walt Disney (DIS) and take delivery of the colorful stock certificate. The certificate would be placed in a sturdy, glass-covered frame and hung on the child's bedroom wall.
Many of those stock certificates still exist, and their value has skyrocketed over the decades. As the owner of theme parks deemed "the happiest places on earth" and a media empire that includes the ABC network and ESPN cable network, DIS knows how to generate lots of green, crisp money.
If you've been waiting to buy some shares or add to your existing Disney shares, this may be a good time. Thursday, the company reported its latest quarterly earnings. Although quite positive considering the times, the company missed revenue forecasts and the stock dipped $1 after-hours.
Disney's net income in the latest quarter rose 14%, partially due to an increase in revenue. That increase was created mainly by higher consumer spending at its theme parks and on its cruise ships. Yes, they even own a popular cruise line aimed at families with children and grown-up "children," too.
Net income rose to $1.24 billion, or 68 cents per share, from $1.09 billion, or 58 cents per share, a year ago. The adjusted earnings of 68 cents per share matched the expectations of analysts.
When it comes to revenue, although it was 3% higher at $10.78 billion, it was slightly below the $10.9 billion analysts had expected. Movie studio revenue fell and revenue at the company's pay TV and broadcast networks grew a modest 2%. DIS has had better quarters, but overall this one wasn't too bad.
Disney's shares hit an all-time high back on May 15, 2012 at $45.80, and since that time it kept hitting new highs. On Sept. 25 it hit both a 52-week high and another all-time high of $53.40. The chart below helps us to see how the stock price has grown along with its operating margin and increasing revenue. DIS data by YCharts
As you can see, the quarterly revenue growth rate has subsided and so the stock is pulling back. The 200-day simple moving average of the stock price is slightly above $46, and there aren't enough reasons to believe the stock will correct that much.
Jim Cramer and Stephanie Link actively manage a real money portfolio for his charitable trust -- enjoy advance notice of every trade, full access to the portfolio and deep coverage of the latest economic events and market movements.