Entertainment Earnings Previews for You to Look At
Damon is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Most of the major media companies in the U.S. plan to report earnings in early August. Here are earnings previews of three of the largest:
Should stay on an upward path
The profit trend at Walt Disney (NYSE: DIS) is likely to remain positive. Income from Media Networks is increasing steadily, with ESPN continuing to be the catalyst. In addition, its Parks & Resorts segment is witnessing a revitalization, driven by its core Florida and California properties, where guest spending and attendance are climbing.
Disney is, in fact, the home of cable networks, ESPN, Disney Channel, and others, along with ABC. In all, broadcast businesses contribute nearly half of revenue and almost two-thirds of operating income. Its vacation resorts and other properties may bring in another 30% of revenue or so, and around 20% of operating income on an annual basis. Furthermore, it operates Studio Entertainment, Interactive, and Consumer businesses that tend to fluctuate more on events such as film releases.
Fiscal third-quarter (ended in June) profit will likely be reported at around $1.03 according to analysts, more than last year's $1.01 tally. The pace of earnings growth is likely to pick up in the September interim, when park visitation picks up and media networks are in slowdown summer mode. This is because of the rapid pace of profit gains likely to persist at Parks & Resorts; along with domestic parks, it is beefing up its cruise line and international park operations (see prior blog: "Disney's Accelerated International Expansion").
As for Disney stock, I reiterate that it is a good long-term holding. The company is bolstered by a core group of top-notch units, while investing in the future, too. On that note, it is retaining its partial ownership in online television broadcaster Hulu.
Viacom (NASDAQ: VIAB) is set for a surge in profit in the just-ended June quarter. Similar to Disney's ESPN, the company's network business is commanding higher revenue from affiliate fees paid by cable system operators. Along those lines, its digital distribution agreement with Netflix should begin to provide greater benefits. Finally, Viacom's Paramount releases, Star Trek Into Darkness and World War Z, performed well at the box office during May and June, respectively.
Viacom attributes roughly two-thirds of revenue to its Media Networks unit, comprised of the likes of MTV, VH1, Nickelodeon, Comedy Central, BET, and Spike. The overwhelming bulk of the remainder is derived from its Filmed Entertainment business (Paramount), a unit set to thrive. Several years ago, when it decided to reduce the number of annual film outputs, it embarked on a time of improved streamlining within that business, now marked by a higher-quality, lower number of films. (see prior blog: "Viacom's Next Growth Drivers").
Viacom shares should provide long-term capital appreciation to investors. Investments in its networks unit should benefit results, along with an aggressive marketing geared toward young audiences through digital and online related spending.
Solid growth expected
Time Warner (NYSE: TWX) will also probably post a nice earnings gain for the June quarter. Its premium (pay) cable networks are generating substantial increases in subscription revenue. Moreover, film revenue will be a boon to the bottom line, thanks to the blockbuster Man of Steel.
The company's Networks business, in this instance, provides about 50% of total revenue. Film and TV Entertainment comprises nearly 40% of the remainder, while its Publishing business contributes the rest. The company is, too, making strides in the online/digital market through video-on-demand investments. (see prior blog: "Time Warner's TV Growth Opportunity").
Time Warner shares are a good holding for the three- to five-year time frame. Between properties like HBO, TNT, TBS, and Warner Bros. studios, it ought to fare well. It sees the VOD market as a profit enhancer to a greater extent, too.
Summing it Up
Overall, the differences among these top-three entertainment conglomerates are few. They are strengthened by cable units that still have room for growth over subsequent years. Disney is highlighted by the parks division, while Viacom and Time Warner's secondary businesses are their film operations.
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Damon Churchwell has no position in any stocks mentioned. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!