Disney's a Big, Strong Stock in a Small World After All

NEW YORK (TheStreet) -- There are still some stocks out seemingly immune to international political events in Russia, Ukraine, Gaza, Iraq and so on. It may be a small world after all but Walt Disney (DIS) is not so affected. It just keeps growing.

There's Frozen -- the film and the paraphernalia. Same with Guardians of the Galaxy.  You’ve got two American Disney parks, four international parks, Disney resorts and a Disney cruise line to boot. Then add to that ESPN and ABC plus the Disney studio entertainment empire. 

Disney reported earnings results recently, beating analyst estimates by 11 cents and also beating revenue estimates as well. The strong quarter posted by the studio entertainment division was behind much of the upside as Disney continues to reap the benefits of the Frozen franchise. 

Media networks was strong as well, but ESPN did take a hit on higher programming and content costs associated with World Cup and a new Major League Baseball deal.  But the parks and resorts unit was up nicely year-over-year as higher attendance at the U.S. resorts and cruise ships offset international weakness. 

Disney is one heck of a well-run company with lots of areas to grow. Out of 3,850 stocks I track, Disney is ranked #184. 

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In an environment that favors large-cap stocks, Disney is a $150 billion mega-cap company. 

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Disney shares, at around $88, are up nearly 15% for the year to date and 37% for the past 52 weeks.  Over the last five years, it has doubled the returns of the market by delivering 29% per year compared to the market’s 14%. Over the last three years, it has averaged 32% per year.

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So Disney gets an A- for performance.  I’m thinking back to how I would’ve felt about Disney about five years ago. Honestly, I would have been hard-pressed to say Disney was going to be such a top-performing stock. But Disney continues to find new ways to expand its popular brand. It has been a great growth story. 

I currently own Disney in my Income & Growth accounts.  It pays a decent dividend yield of 1% and offers investors capital appreciation potential. It trades at 18X forward earnings which is just a slight premium to the market.  It receives a Value Grade of B+.

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Disney is expected to grow 16% per year over the next five years. I have a five-year target price of $154 per share.

Disney currently receives a stock grade of B+, but continues to be a best stock for right now.  If the U.S. economy and market turns into a bear market, Disney would be vulnerable. But in this bull market, all I have to say about Disney is, hakuna matata.

At the time of publication, the author was long DIS, although positions may change at any time.

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This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

TheStreet Ratings team rates DISNEY (WALT) CO as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate DISNEY (WALT) CO (DIS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Powered by its strong earnings growth of 26.73% and other important driving factors, this stock has surged by 29.73% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • DISNEY (WALT) CO has improved earnings per share by 26.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, DISNEY (WALT) CO increased its bottom line by earning $3.38 versus $3.12 in the prior year. This year, the market expects an improvement in earnings ($4.28 versus $3.38).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Media industry average. The net income increased by 21.5% when compared to the same quarter one year prior, going from $1,847.00 million to $2,245.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 11.7%. Since the same quarter one year prior, revenues slightly increased by 7.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Media industry and the overall market, DISNEY (WALT) CO's return on equity exceeds that of both the industry average and the S&P 500.

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