3 ETFs In Focus Following Disney's Robust Q3 Earnings

Shares of The Walt Disney Company (NYSE:DIS) got a boost on Wednesday after the company reported better-than-expected fiscal third-quarter earnings late Tuesday. Moreover, the company’s acquisition of a stake in BAMTech also had a positive impact on the company’s price performance yesterday. Shares of Disney rose 1.2% on Wednesday.

Regarding the purchase of a stake in BAMTech, which is expected to boost “streaming capabilities at ESPN,” John Skipper, ESPN President said: “Bringing a multi-sport service directly to fans is an exciting opportunity that capitalizes on BAMTech’s premier digital distribution platform and continues ESPN’s heritage of embracing technology to create new ways to connect fans with sports.”

Q3 Numbers in Detail

Walt Disney Company posted third-quarter fiscal 2016 earnings per share of $1.62, which rose 11.7% year over year and beat the Zacks Consensus Estimate by a cent.

Revenues were up 9% year over year to $14.277 billion, beating the Zacks Consensus Estimate of $14.167 billion. The increase was attributable to higher revenues from Media Networks (up 2%), Parks and Resorts (up 6%) and Studio Entertainment (up 40%). However, revenues from the Consumer Products & Interactive Media segment declined 1% to $1,145 million.

Cable Networks revenues for the quarter were up 1% to $4.2 billion. Growth in Cable Networks revenues was driven by a rise in affiliate revenues and advertising revenue at ESPN (read: Disney Q2 Disappoints Investors; ETFs Under Pressure?).

Separately, the company’s total operating income came in at $4,456 million during the quarter, up 8% year over year. The upside was primarily driven by 62% and 8% increase in operating income from Studio Entertainment and Parks and Resorts, respectively.

Disney Acquires Stake in BAMTech

In addition to encouraging third-quarter results, Disney announced that it has purchased a minority stake in BAMTech, a video streaming company originally created by Major League Baseball. The media giant will spend $1 billion for a 33% stake in BAMTech. Disney says that it will use BAMTech to create an ESPN-branded, over-the-top video streaming service that will cover a variety of sports.

Regarding the purchase, Chairman and Chief Executive Officer of Disney, Robert A. Iger said: “Our investment in BAMTech gives us the technology infrastructure we need to quickly scale and monetize our streaming capabilities at ESPN and across our company.” He also added: “We look forward to working closely with BAMTech as we explore new ways to deliver the unmatched content of The Walt Disney Company across a variety of platforms.”

3 ETFs in Focus

Disney currently has a Zacks Rank #3 (Hold), which underscores its potential for further upside. Given impressive third-quarter results, we have highlighted three ETFs with heavy exposure to this giant for investors seeking to bet on the stock along with the broader industry (see: all Consumer Discretionary ETFs here).

Consumer Discretionary Select Sector SPDR ETF XLY

This product offers exposure to the broad consumer discretionary space by tracking the Consumer Discretionary Select Sector Index. With an asset base of $10.1 billion, XLY is the largest and most popular ETF in its space. It holds 89 shares in its basket. Walt Disney has an exposure of 6.2% in the fund. Sector wise, Media takes the top spot with 21.5% of the assets, followed by Specialty Retail (21.4%). The product trades in a solid volume of 6 million shares per day and charges 14 bps in fees. XLY has gained 3% in the trailing three months and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: ETFs to Gain as Amazon (NASDAQ:AMZN) Crushes Q2 Estimates).

Vanguard Consumer Discretionary ETF (HN:VCR)

This ETF follows the MSCI U.S. Investable Market Consumer Discretionary 25/50 Index and holds a large basket of 388 stocks. Walt Disney, at the fourth spot, has an exposure of 5.3% in the fund. As far as sector allocation is concerned, Internet Retail takes the top spot in the fund (14.7%) followed by Restaurants (10.7%), Movies & Entertainment (10.1%) and Cable & Satellite (9.8%). The product has managed to accumulate roughly $1.9 billion in its asset base so far and trades in a moderate volume of nearly 101,000 shares per day. It is very cheap with 10 bps in annual fees. VCR has gained 3.4% in the trailing three months and currently carries a Zacks ETF Rank #3 with a Medium risk outlook.

Fidelity MSCI Consumer Discretionary ETF (NYSE:DIS)

This fund tracks the MSCI USA IMI (LON:IMI) Consumer Discretionary Index and holds a large basket of 384 consumer discretionary equities in the U.S. Walt Disney accounts for 5% of the fund’s assets. From a sector perspective, Media takes the top spot in the fund with 22.8% of the assets, followed by Specialty Retail (19.6%). The product has amassed $260.6 million in its asset base and trades in a moderate volume of more than 92,000 shares per day. It charges 8 bps in annual fees. FDIS gained 3.2% over the past three months and has a Zacks ETF Rank #3 with a Medium risk outlook (read: Fidelity Slashes Fees for 11 Sector ETFs).

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