Walt Disney Co. (NYSE:DIS)

The analysis of the financial metrics over the six-year period reveals notable fluctuations in the company's operating performance and value creation.

Net Operating Profit After Taxes (NOPAT)

The NOPAT experienced significant volatility, with a peak of 16,211 million US dollars in 2019, followed by a drastic decline to a negative value of -2,053 million US dollars in 2020. This downturn was succeeded by a partial recovery to 2,215 million US dollars in 2021 and a continued upward trend through 2022, reaching 6,699 million US dollars. However, this positive trajectory was not consistent, as NOPAT decreased again to 3,406 million US dollars in 2023 before rising to 6,260 million US dollars in 2024. The pattern indicates a period of financial stress with a recovery phase, yet the NOPAT has not returned to the pre-2019 high.

Cost of Capital

The cost of capital remained relatively stable, fluctuating slightly in a narrow range between 14.82% and 15.52%. This stability suggests consistent market or risk assessment of the company’s capital structure and risk profile over the analyzed period.

Invested Capital

Invested capital showed moderate variation, rising from 169,178 million US dollars in 2019 to a peak of approximately 174,594 million US dollars in 2020, followed by a gradual decline to 166,066 million US dollars by 2024. This decline in the latter years may reflect asset impairments, divestitures, or operational efficiencies leading to lower capital requirements.

Economic Profit

Economic profit consistently remained negative throughout the period, with its lowest point in 2020 at -28,052 million US dollars. Although the figure showed some improvement in subsequent years, improving to -19,136 million US dollars by 2024, it persistently illustrated that the company did not generate returns in excess of its cost of capital in any year. This ongoing negative economic profit highlights challenges in value creation despite recovering NOPAT figures.

In conclusion, the company's financial performance during the period exhibited significant challenges, especially in 2020, followed by a partial recovery in profitability. Despite stable capital costs and slight reductions in invested capital, the inability to achieve positive economic profit suggests that the firm struggled to generate adequate returns relative to its cost of capital. Continued strategic initiatives may be necessary to restore stronger profitability and sustainable value creation.

Net Income (Loss) Attributable to The Walt Disney Company

The net income demonstrates significant variability over the analyzed years. Initially, there was a strong positive net income of 11,054 million US dollars in the fiscal year ending September 28, 2019. However, this was followed by a substantial decline resulting in a net loss of 2,864 million US dollars in the fiscal year ending October 3, 2020. Recovery began in the subsequent years, with net income returning to positive figures of 1,995 million US dollars in 2021, increasing to 3,145 million US dollars in 2022. There was a slight decline to 2,354 million US dollars in 2023, followed by a pronounced increase to 4,972 million US dollars in 2024. Overall, the net income figures show a sharp dip likely attributable to extraordinary or cyclical factors around 2020, with a clear recovery trend in the subsequent periods.

Net Operating Profit After Taxes (NOPAT)

The NOPAT figures follow a pattern similar to net income, reflecting operational profitability after tax adjustments. Starting at a robust 16,211 million US dollars in 2019, there was a notable drop to -2,053 million US dollars in 2020, indicating operational losses during that period. A gradual recovery is observed in the following years, with an increase to 2,215 million US dollars in 2021, and a significant rise to 6,699 million US dollars in 2022. The year 2023 saw a decrease to 3,406 million US dollars, but this was followed by another increase to 6,260 million US dollars in 2024. These fluctuations suggest a period of operational challenges in 2020, followed by a strong recovery and intermittent volatility in the subsequent years.

Summary of Trends

Both net income and NOPAT experienced a pronounced decline in the fiscal year 2020, reflecting a challenging environment for the company during that period. The figures suggest a recovery trajectory beginning in 2021, with steady improvements through 2022 and 2024. Despite some fluctuations in 2023, the overall trend is positive, indicating enhanced profitability and operational efficiency over the longer term. The data points to resilience and a capacity to recover from significant setbacks, with profitability levels approaching or exceeding pre-2020 values by 2024.

The data reveals notable fluctuations in both income tax expenses on income from continuing operations and cash operating taxes over the periods analyzed.

Income Tax Expense on Income from Continuing Operations

This metric shows a significant decline from 3,031 million US dollars in 2019 to a low of 25 million in 2021, indicating a substantial reduction in tax expenses relative to income during that year. However, there is an upward trend following 2021, rising to 1,732 million in 2022, then slightly decreasing to 1,379 million in 2023, before increasing again to 1,796 million in 2024. Despite these fluctuations, the 2024 figure remains lower than the 2019 value but is substantially higher than the minimal level seen in 2021.

Cash Operating Taxes

Cash operating taxes exhibit a consistent upward trend over the entire period, starting at 1,297 million US dollars in 2019 and increasing steadily each year. The rise becomes more pronounced from 2022 onwards, with an increase from 1,891 million in 2022 to 3,100 million in 2023, followed by a slight decrease to 2,982 million in 2024. Overall, cash operating taxes more than doubled from 2019 to their peak in 2023, indicating increased tax payments in operational cash flows.

The contrasting trends between income tax expense and cash operating taxes suggest differing impacts on accounting income versus cash flow basis taxes, with income tax expense experiencing volatility, while cash operating taxes show a clear upward pattern until 2023, stabilizing slightly in the latest period.

Total reported debt & leases

The total reported debt and leases exhibited an overall decreasing trend from 2019 to 2024. Starting at $50,841 million in 2019, the amount increased to a peak of $62,323 million in 2020, likely reflecting heightened borrowing or leasing activities during that year. Subsequently, there was a consistent decline through 2024, culminating in $49,517 million, which is slightly below the 2019 level. This pattern indicates a strategic reduction in debt and lease obligations following the 2020 peak.

Total Disney Shareholder’s equity

Shareholder’s equity showed a generally upward trajectory over the period. Beginning at $88,877 million in 2019, equity decreased to $83,583 million in 2020, which might be associated with the elevated debt levels that year. From 2020 onward, equity increased steadily, reaching $100,696 million by 2024. This growth suggests an improvement in retained earnings or additional equity infusions, leading to stronger financial stability and increased net asset value.

Invested capital

Invested capital remained relatively stable throughout the period but demonstrated a slight overall decline from 2019 through 2024. Starting at $169,178 million in 2019, the value peaked slightly in 2020 at $174,594 million and fluctuated modestly thereafter. By 2024, invested capital was recorded at $166,066 million, indicating a minor contraction of about 2% from the 2019 figure. This stability implies steady investment levels in the company's operational assets despite fluctuations in debt and equity.

Summary

The data reflects a period of financial adjustment characterized by a peak in debt and leases in 2020, followed by a systematic reduction through 2024. Concurrently, shareholder equity experienced a dip in 2020 but then strengthened significantly, surpassing the pre-2020 levels by 2024. Invested capital remained mostly stable, suggesting consistent asset base maintenance. Overall, these trends suggest an emphasis on deleveraging and improving equity position while maintaining steady investment in capital assets over the analyzed timeframe.

Economic Profit

Economic profit has consistently been negative throughout the periods analyzed, indicating that the company has not generated returns above its cost of capital. The value worsened sharply from -10,050 million USD in 2019 to a peak negative of -28,052 million USD in 2020, likely reflecting increased challenges or extraordinary costs during that year. Subsequently, there was some recovery over the next few years, with economic profit improving to -19,136 million USD by 2024, though it remains substantially below the 2019 level.

Invested Capital

Invested capital showed a generally stable trend over the years, fluctuating slightly but remaining near the 170,000 million USD mark for most periods. It peaked at 174,594 million USD in 2020 and then gradually declined to 166,066 million USD by 2024, suggesting some asset disposals, divestments, or lower reinvestment levels in recent years.

Economic Spread Ratio

The economic spread ratio, which measures the difference between return on invested capital and cost of capital as a percentage, remained negative in all analyzed periods. It reflected significant deterioration in 2020, dropping to a low of -16.07%. Although it improved slightly through the subsequent years, it was still negative at -11.52% in 2024, indicating that the company continued to generate returns below its required benchmark.

Overall Insights

The financial data indicates a challenging operating environment, particularly in 2020, with economic profit and spread showing steep declines. Despite some recovery in the following years, the company has not yet returned to generating positive economic profit or positive economic spread ratios by 2024. Meanwhile, the relatively stable invested capital suggests that changes in asset base were not the primary driver of profitability challenges. These patterns highlight ongoing difficulties in achieving adequate returns above capital costs over the examined timeframe.