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Disney Posts Solid Earnings; 3 ETFs to Watch

Published 08/07/2014, 07:25 AM
Updated 07/09/2023, 06:31 AM

The largest global entertainment company, The Walt Disney Company (NYSE:DIS), has impressed investors once again with its quarterly results.  Blockbuster performance from its two big movies – Marvel’s "Captain America: The Winter Soldier" and "Maleficent" – led the company to post its highest earnings per share in history. The company’s blockbuster animated film "Frozen" continues to mint money and had strong sales of merchandise tied to it.

Disney’s purchase of Marvel Entertainment in 2009 is also yielding strong dividends. The current summer blockbuster “Guardians of the Galaxy”, from Marvel, is believed to be doing strong business. 

Walt Disney Earnings in Focus

Disney posted its highest earnings per share in history at $1.28 per share, up 27% year over year during the third quarter of fiscal 2014, beating the Zacks Consensus Estimate by roughly 9%. Moreover, revenues jumped 8% year over year to $12.466 billion, ahead of the Zacks Consensus Estimate by nearly 2.5%.
 
Though most of the segments showed strength, operating income at the company’s media networks division was flat and declined for the unit's cable networks segment. Higher sports programming and production costs at ESPN and the absence of ESPN UK were the factors for the decline.
 
However, Disney's studio entertainment segment saw the biggest increase in operating income, up more than 100% year over year, buoyed by the incredible success of “Captain America” and “Maleficent" in the theaters and home entertainment sales for "Frozen”. Also, increased attendance and guest spending led the company to report a 23% jump in operating profit at the theme parks unit.

ETFs to Watch

Propelled by solid earnings results, Disney shares gained 0.58% following the earnings announcement in the after-market, eventually closing a tad lower in the regular market.
 
Given the solid results, the stock might again move northwards to test its 52-week high of $87.63 and might even break past it, if the overall market sentiment turns positive. Moreover, the stock has a favorable Zacks Rank #3 (Hold), further underscoring its potential.
 
As a result, Consumer Discretionary ETFs that have the highest allocation to Disney are sure to be in focus in the coming days. Investors should closely monitor the movement of these funds and tap the opportunity from any gain in Disney’s share price.
 
Though the sector saw some rough trading during the first half, recent positive economic data might infuse some life to the lackluster consumer discretionary sector in the coming days.
 
Consumer Discretionary Select Sector SPDR Fund (ARCA:XLY)


With an asset base of $5.6 billion, XLY is the largest and most popular ETF in its space. Holding 84 shares in its basket, the product looks moderately concentrated in the top 10 holdings. Walt Disney takes the top spot in the fund having nearly 7% exposure, followed by Comcast (NASDAQ:CMCSA) and Amazon (NASDAQ:AMZN).

From a sector viewpoint, media takes the top spot with 31% of assets, followed by specialty retail (16.8%), hotels and restaurants (14%), and Internet retail (11.2%).

The fund charges 16 basis points as fees and has a Zacks ETF Rank #4 or Sell rating.
 
Vanguard Consumer Discretionary ETF (NYSE:VCR)

This ETF follows the MSCI U.S. Investable Market Consumer Discretionary 25/50 Index and holds 385 stocks in its basket. The product has managed to accumulate $1.1 billion in its asset base so far, charging investors just 14 bps in annual fees.
 
Walt Disney occupies the top spot having 5.2% exposure, followed by Comcast and Amazon. Movies and entertainment, cable and satellite, and Internet retail are the top three sectors accounting for a combined exposure of roughly 30% of assets.
 
VCR currently carries a Zacks ETF Rank #4 or Sell rating.
 
Dynamic Leisure & Entertainment Portfolio (NYSE:PEJ)

PEJ seeks to track the Dynamic Leisure and Entertainment Intellidex Index. PEJ invests about $163.3 million of assets in 30 holdings. Time Warner Inc, Marriott International and Walt Disney are the top three holdings, each having more than a 5% share in the basket.

The product charges 63 basis points and has a Zack ETF Rank #3 or Hold rating.

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