Not long ago, the big knock against Walt Disney (NYSE:DIS) stock was the deterioration of the ESPN business. Somehow it looked like an inevitable downward spiral.

But as seen with the fiscal fourth-quarter report, things are far from dire. Disney stock is up nearly 3% since Friday and DIS shares have risen about 13% for the past year.

So let’s get a run-down on the quarter. Overall revenues increased by 12% to $14.31 billion and earnings rose by 33% to $2.32 billion.

When excluding one-time items, the profits came to $1.48 per share. As for the Wall Street consensus, it was calling for earnings of $1.34 per share and revenues of $13.73 billion.

On a full-year basis, Disney reported record-breaking numbers, with revenues of $59.43 billion and profits of $12.6 billion. The analysts, on the other hand, were looking for revenues of $55.14 billion and earnings of $8.98 billion.

During the quarter, there was broad-based strength. The Media Networks business — which includes cable and broadcast properties — reported a 9% increase in revenues to $6 billion. And as for the Parks and Resorts segment, revenues climbed by 9% to $5.1 billion.

But the main driver for the quarter came from the studio, which reported a 50% spike in revenues. Throughout the year, Disney has released mega-hits like Black Panther, Incredibles 2 and Avengers: Infinity War.

Although, the quarter was not without its blemishes. Note that the Consumer Products & Interactive Media reported an 8% decline in revenues to $1.1 billion. Some of the reasons for this include the performance with retail stores as well as the fall-off in licensing of products based on “Star Wars” and “Cars.”

DIS Stock and Streaming

When it comes to Disney stock, the key is the aggressive move toward streaming. To this end, the company agreed to shell out $71.3 billion for Twenty-First Century Fox (NASDAQ:FOXA). The deal, which is expected to close sometime next year, will provide extensive film/tv production assets as well as a valuable library, which includes franchises like “Avatar” and “X-Men.” There will also be additional equity in Hulu (bringing the ownership to roughly 60%).

In fact, Disney has already shown traction with its streaming efforts. The ESPN+ service has signed over 1 million customers during the past six months. It certainly helps that Disney owns BAMTech, which has allowed for a much quicker development of the service.

Next, in 2019, Disney plans to launch its general entertainment offering, called Disney+. The service will include content from Lucasfilm, Marvel, Pixar, Disney Animation and National Geographic.

As seen with the huge success of Netflix (NASDAQ:NFLX), a streaming platform allows for a lucrative source of recurring revenues and access to extensive viewing data. Although, Disney will have even more advantages, such as with the synergy with consumer products and the parks business.

Bottom Line on Disney Stock

The acquisition of Fox is certainly risky. The fact is that mega Hollywood deals have a sketchy history. But then again, Disney CEO Bob Iger has an outstanding track record. His deals for Pixar, Marvel, Lucasfilm and BAMTech were critical in transforming the company.

Besides, Iger has been making the right moves with leveraging core assets for the streaming offerings. And again, as seen with NFLX, this approach can lead to strong growth.

So for Disney stock, which already has had a nice run, I think there is still more room on the upside. Consider that the forward price-earnings ratio is currently about 15X, which is definitely a reasonable level for a company that should have some notable catalysts in the next couple of years.

— Tom Taulli

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Source: Investor Place