Skip to Content
Commentary

'Frozen' Heats Up Disney's Third Quarter; Shares Fairly Valued

Disney is a high-quality business, but we'd wait for at least a 10% discount to our fair value estimate before getting excited about investing, says Morningstar’s Neil Macker.

Mentioned:

 Disney (DIS) posted another strong quarter, with results coming in slightly ahead of our forecast for fiscal 2014. Our $84 fair value estimate and wide economic moat rating stand. While impressed by the execution, we would prefer a wider margin of safety in the share price before investing.

Third-quarter revenue grew 7.7% over last year to $12.5 billion, slightly above our estimate of $12.2 billion. EBITDA increased 13.5% to $4.0 billion, above our $3.7 billion estimate. The EBITDA margin widened to 32.0%. The strong quarter posted by the studio entertainment segment drove the majority of the upside surprise, as the segment continues to reap the benefits of "Frozen." Studio entertainment produced 13.6% revenue growth, well above our flat estimate.

Neil Macker does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.