Walt Disney Co. (NYSE:DIS)

Net operating profit after taxes (NOPAT)

The net operating profit after taxes exhibited significant volatility over the period analyzed. It started at a strong positive figure of 16,211 million US dollars in 2019. However, in 2020, there was a sharp decline resulting in a substantial negative value of -2,053 million US dollars. Following this downturn, NOPAT showed signs of recovery, reaching 2,215 million US dollars in 2021 and further increasing to 6,699 million US dollars in 2022. Despite a decline to 3,406 million US dollars in 2023, the figure improved again to 6,260 million US dollars in 2024. Overall, NOPAT displays a pattern of recovery after a significant drop, but remains below the 2019 peak levels.

Cost of capital

This metric remained relatively stable throughout the period, fluctuating modestly between 14.75% and 15.45%. The highest cost of capital was observed in 2019 at 15.45%, slightly decreasing in 2020 and 2021 to around 14.8%-15.0%, and then marginally increasing again to 15.22% in 2024. The cost of capital's steady level indicates consistent market and funding conditions for the investment environment.

Invested capital

Invested capital showed minor fluctuations over the years but remained broadly stable overall. Starting at 169,178 million US dollars in 2019, it rose slightly to a peak of 174,594 million US dollars in 2020 before gradually tapering down to 166,066 million US dollars by 2024. This suggests a controlled level of capital investment with a subtle reduction in the later years, potentially reflecting optimization or divestment strategies.

Economic profit

Economic profit consistently registered negative values throughout all years, indicating that the returns did not exceed the cost of capital. Beginning at -9,922 million US dollars in 2019, the deficit deepened significantly to -27,925 million US dollars in 2020, aligning with the steep decline in NOPAT during the same period. Although there was a gradual improvement following the 2020 trough, with less negative results in subsequent years, economic profit remained substantially below zero, with -19,014 million US dollars in 2024. This persistent negative economic profit demonstrates ongoing challenges in generating value above the expected capital costs.

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

The economic profit shows significant negative values across all periods, indicating ongoing challenges in generating returns above the cost of capital. The figure deteriorated sharply from -9,922 million US dollars in 2019 to a low point of -27,925 million US dollars in 2020. Although some improvement occurred thereafter, with values moderately increasing to -18,966 million US dollars in 2022, the economic profit remained negative and fluctuated around -19,000 to -23,000 million US dollars up to 2024. This pattern suggests persistent difficulties in achieving profitability that exceeds capital costs.

Invested Capital

Invested capital experienced slight growth from 169,178 million US dollars in 2019 to a peak of approximately 174,594 million US dollars in 2020, maintaining a relatively stable range around 173,000 to 174,000 million US dollars through 2023. A notable decline occurred in 2024, with invested capital falling to 166,066 million US dollars. This reduction may reflect divestitures, asset reductions, or adjustments in capital allocation strategies after several years of relatively steady capital investment.

Economic Spread Ratio

The economic spread ratio, representing the difference between return on invested capital and cost of capital, remained consistently negative throughout the periods analyzed. Starting at -5.86% in 2019, it worsened sharply to -15.99% in 2020, signifying decreased efficiency or increased capital costs during this timeframe. Subsequently, the ratio improved somewhat but remained negative, fluctuating between -13.74% and -10.9% from 2021 to 2024. This indicates that returns did not cover costs, although there was a gradual improvement after the 2020 trough.

Adjusted Revenues

The adjusted revenues exhibit an overall upward trend across the periods analyzed. Starting at 70,704 million USD in 2019, there is a decline in 2020 to 64,920 million USD, likely reflecting external economic challenges during that period. From 2021 onwards, revenues increase steadily, reaching 91,261 million USD by 2024, suggesting a recovery and growth phase.

Economic Profit

The economic profit figures remain negative through all periods, indicating losses when considering economic costs. The losses deepen significantly from -9,922 million USD in 2019 to a peak loss of -27,925 million USD in 2020. While there is some improvement after 2020, the negative economic profit continues, with values fluctuating but maintaining a substantial loss magnitude, ending at -19,014 million USD in 2024.

Economic Profit Margin

The economic profit margin follows a similar pattern to economic profit, remaining negative throughout the years. The margin drops sharply from -14.03% in 2019 to -43.01% in 2020, reflecting the intensified losses relative to revenues in that year. Subsequent years show gradual improvement, with the margin narrowing to -20.83% by 2024, indicating a partial recovery but still a marked deficit relative to sales.

Insights

The data suggests that the company faced significant economic challenges beginning in 2020, adversely impacting profitability despite recovery in adjusted revenues. The persistence of negative economic profit and margins indicates ongoing difficulties in generating returns above economic costs. However, the improving trend post-2020 points to operational or strategic adjustments contributing to a reduction in losses. Continued focus on enhancing profitability relative to revenues appears necessary to transition into positive economic profit territory.