Walt Disney Company (DIS)

You might think that in a weak economy, consumers would cut back on things like trips to Disney’s theme parks. But their theme park revenues and earnings for the quarter ended March 31, released yesterday, were impressive. Revenues were up 11% and operating income 33% (DIS FY 2Q Earnings Release). The press release notes: “Higher attendance was primarily driven by the benefit of the shift of the Easter holiday”.

The point to note is that the number of foreign visitors to Disney’s US theme parks was up 25% compared to the year ago period, the Wall Street Journal cited CEO Bob Iger as saying (Disney Parks Flourish Despite Economic Drought” (subscription required), The Wall Street Journal, Wednesday May 7, B1). Disney’s report is supposed to be a sign that the domestic economy isn’t really as weak as some people are saying. But how much of Disney’s domestic theme park strength was driven by a weak dollar and foreign visitors?

The Disney brand is still strong and world-famous. This particularly helps the company in international expansion. In 2006, only 23% of the total revenue came from international operations, so there is much room to grow, including developing locally-produced content.

The movie business is highly volatile. However, Disney has an enviable library of filmed content that continues to generate solid and relatively stable cashflow.

Disney's purchase of Marvel is a master stroke. why? With Disney’s distribution and brand protection, they can leverage characters better than anyone. This move shows that Disney sans Eisner can be successful and, we suspect, very profitable.

Disney was the first company to distribute its video content on iTunes and is spending millions of dollars developing ABC.com, ESPN.com, and Disney.com. Streaming content online is catering to video-on-demand and mobile technology like video iPods. This not only draws more viewers, this opens a new venue for advertisement.

As the economy recovers from the great recession, people are going to be ready for a vacation. Disney is an American institution, that is where the baby boomers are going to want to take their kids and grandchildren.