We leverage our Robo-Analyst to comb through the 10-Q’s and 10-K’s, including the footnotes and MD&A, of the ~3,000 companies under coverage to ensure we provide the most reliable fundamental data to our clients. Through this diligence, we noticed something missing from The Walt Disney Company’s (DIS) income statement in its fiscal 1Q21 10-Q: “Other Income.”
What Happened to Disney’s “Other Income”?
While analyzing Disney’s most recent 10-Q, analyst Alex Richmond found that Disney did not report any Other Income for the quarterly period ended January 2, 2021. In past filings, Disney reports “Other Income”, which often includes non-cash gains and losses on investments, on its income statement. For example, Disney reported $1 billion of Other Income in its 2020 10-K, which included $973 million in non-cash gains on its investment in DraftKings.
In 1Q21, Disney recognized a $186 million non-cash gain in its fuboTV investment and a $186 million non-cash loss in its DraftKings investment. Quite a coincidence that these gains/losses perfectly offset, and Disney has no “Other Income” to report. See the disclosure on page 30 of its fiscal 1Q21 10-Q.
How We Treat Non-Operating Items Such as “Other Income”
Non-operating items, such as Disney’s “Other Income,” are why GAAP net income and analyst earnings don’t tell the whole story of a company’s profitability. We adjust for all unusual items, both hidden and reported, to calculate a more accurate measure of a firm’s profitability.
Without such diligence, investors could make misinformed investment decisions.
Only our “novel dataset”, which leverages our Robo-Analyst technology, enables investors to overcome flaws with legacy fundamental datasets to apply reliable fundamental data in their research. Core Earnings: New Data & Evidence, accepted for publication by The Journal of Financial Economics also proves the superiority of our fundamental data, Core Earnings models, and securities research.
This article originally published on February 19, 2021.
Disclosure: David Trainer, Alex Richmond, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, sector, style, or theme.