by Tuna Amobi, S&P Capital IQ equity analyst, S&P The Outlook
Our latest Focus Stock is Walt Disney
), which carries S&P Capital IQ's highest investment recommendation of 5-STARS, or "strong buy."
expect the company, as a cyclical bellwether, to be a major beneficiary
of a global macroeconomic rebound, with improving fundamentals across
virtually all of its core businesses.
Disney, we believe, offers a relatively balanced asset mix that
typically performs well ahead of a cyclical economic upturn, while
leaving it relatively exposed to an economic downturn.
investment opinion reflects what we see as Disney's execution of a
proven, multi-platform strategy for content exploitation that strikes a
balance between organic growth and acquisitions.
the years, Disney has grown internally and acquired a stable of
lucrative content franchises including Mickey Mouse, Disney Princess,
Toy Story, Lion King, Pirates of the Caribbean, Cars, Avengers, Star
Wars, and several others.
Under a management team led by Chief
Executive Robert Iger, Disney has been at the forefront of embracing
newer digital outlets, most recently in a film output deal with Netflix.
Also, concerted efforts are under way to expand into emerging
markets such as India, Russia, Latin America, and China, which recently
eased its film restrictions. Disney is planning to open its new Shanghai
theme park, a joint venture with the Chinese government, in 2015.
a recent stabilization in key operating metrics at the worldwide theme
parks, we expect a substantially completed multi-year cycle of capital
upgrades at the parks — including new attractions at Disney California
Adventure, Disney World and Hong Kong Disneyland, as well as two new
cruise ships — to sustain double-digit returns on invested capital.
believe the media networks businesses will remain the primary near-term
catalyst for the company's financial performance, mainly driven by
relatively healthy advertising trends for ESPN and ABC networks and
stations, as well as higher affiliate rates for ESPN and Disney Channels
(on multi-year renewals of pay TV carriage deals).
about 6% and 7% growth in fiscal 2013 and 2014 consolidated revenues,
respectively, to about $44.8 billion and $47.8 billion.
margin expansion should reflect improved operating leverage from recent
restructuring actions, increased exploitation of worldwide licensing
opportunities, and further theme parks cost savings (including employee
Results should also benefit from a ramp-up of
higher-margin (and relatively nascent) revenue streams — including
digital streaming deals with subscriptions video-on-demand providers.