Disney (DIS) reported another excellent quarter, easily beating Wall Street estimates for revenues and earnings per share.  Especially impressive was the broad-based strength in the results, as every segment beat estimates on revenue and operating income.

Two things come to mind when reviewing DIS latest results.  First, in general, stocks tend to do well when earnings estimates are rising.  With EPS coming in at $1.27 against expectations of $1.07 and strength across all business segments, estimates for 2015 and 2016 are rising.  Second, one of the ore insightful analysts we know who follows DIS did some interesting work in 2014 reviewing prior periods where DIS got on a roll with successful film and TV content.  The work showed that when DIS was consistently producing popular content, earnings surprises tended to be large and persistent.  With Frozen and Marvel films proving hugely popular and likely extremely popular Star Wars, Avengers, and Pixar films coming in 2015, the DIS content engine seems primed for continued superior performance.  DIS has a unique business model that monetizes popular content across all of its divisions, leaving the company well-positioned for another couple of years of excellent earnings growth.

Other positive catalysts for DIS over the next year or two include opening of the Shanghai Disney theme park, continued margin expansion at the domestic theme parks, and an easing of sports rights cost increases at ESPN,

DIS shares typically trade at a premium to the market given the positive perception of the company’s brands, generally good financial performance, and the more stable earnings profile compared to more cyclical media companies.  We are adjusting our target higher to 20 times highly visibleFY16 EPS of $5.50.  This equates to $110.

DIS is widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts.  Steve is sole proprietor of Northlake, a registered investment advisor.  Northlake’s regulatory filings can be found at www.sec.gov.  DIS is a net long position in the Entermedia Funds.  Steve is portfolio manager and managing partner of Entermedia, long/short equity hedge funds focused on media, entertainment, leisure, communications, and related technologies.