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Tuesday, Mar 19, 2024

Big Valley Players Just Keep Getting Bigger

The No. 1 company on the Business Journal’s list of Largest Public Companies ranked by market capitalization comes as no surprise – Walt Disney Co. The Burbank entertainment and media giant has held that spot for the 16 years the list has been compiled. Coming in at No. 2 is also a familiar name – Thousand Oaks drug manufacturer Amgen Inc. In fact, nine of the top 10 public companies on the list are the same as in years past (see page 18). Tuna Amobi, senior analyst with CFRA Research, in New York, said he is positive on Disney and has a target price of $120, even though year to date the stock price has been flat. The target price is based on Disney’s popular film franchises, the news that Chief Executive Robert Iger has extended his contract to stay another two years and that the new theme park in Shanghai is starting to gain traction, Amobi said. “I think it was remarkable when they said the park is on track to break even in its first year,” he added. With a market cap of $166.3 billion as of June 30, Disney had an increase of nearly 5 percent from the same period a year earlier. But according to CFRA Research’s Amobi, the entertainment and media company faces the perception of pressure with its ESPN cable network due to a loss of subscribers, who pay the highest fees for the sports programming. Media reports put the number at 12 million subscribers abandoning the network over the past six years. While ESPN has issues, it is not as cataclysmic as reported, Amobi believes. “To some extent the pressures that Disney is facing are industrywide concerns as opposed to company-specific concerns,” he added. Neil Macker, an equity analyst with Morningstar Inc. in Chicago, noted those pressures in a research report this month, but the research firm was positive about Disney and its media networks business, projecting a 3 to 7 percent annual growth through 2021. While the media environment is competitive, the demand for content from networks, cable and streaming, will only increase. “ESPN’s ability to continue to increase its subscriber fees allows the network to continue to bid on sports programming rights,” the research note said. “We believe that the popularity of the NFL and college football will continue to grow and, given the live nature of its programming, its importance to advertisers will grow as well.” Competing drugs Disney is not alone in facing pressures. Amgen has its issues as well, particularly when it comes to biosimilars – drugs that copy other drugs but which cannot duplicate them exactly. Amgen drugs, including Neupogen and Neulasta, both of which produce white blood cells to fight infection in cancer patients, are seeing increased competition from biosimilars in both the U.S. and Europe. Amgen, however, is also creating its own biosimilars to compete against other large drug companies. A recent research report from Karen Andersen, a strategist for Morningstar, concluded that with additional cost cutting Amgen would see improved margins this year and the bottom line would grow by about 1 percent through 2021. “Manufacturing improvements give us increased confidence in the potential of Amgen’s biosimilar pipeline to compete globally,” the report stated. Another factor that drug makers face is the Trump Administration replacing the Affordable Care Act. If that legislation passes the Senate and becomes law, Andersen foresees it being “largely positive” for pharmaceutical and medical device manufacturers because fees and taxes will be eliminated. In the past year consolidation has removed some big names from the Largest Public Companies roster. They include DreamWorks Animation SKG Inc., acquired by Comcast Corp. in a $3.8 billion deal that closed in August; DTS, bought in December by Tessera Holding Corp. for $850 million; Ixia, acquired in February for $1.6 billion by Keysight Technologies Inc.; Electro-Rent Corp., acquired by private investment firm Platinum Equity in a deal valued at more than $323 million.; Ceres Inc., purchased a year ago by agricultural giant Land O’Lakes Inc. for $17.2 million; online marketer ReachLocal Inc. bought by Gannett Co. Inc.; and Real Industry Inc., which moved its headquarters from Sherman Oaks to New York early this year. New companies joining the list include BlackLine Inc., the Woodland Hills accounting software developer that had its initial public offering in October; and Atara Biotherapeutics Inc., which moved its clinical and regulatory operations as well as manufacturing and distribution to the Conejo Valley from Silicon Valley. The following pages contain profiles of selected companies on the list. Companies were chosen based on significant events or announcements during the year and the level of analyst and investor interest in their stocks. For a third year in a row, commercial real estate brokerage Marcus & Millichap Inc. topped the Business Journal’s Most Profitable Public Companies list (see page 20). The list is based on a three-year return on equity, with the Calabasas firm compiling a 42 percent return. Restaurant chain operator DineEquity Inc., in Glendale, was in the second position with a 29 percent return. Return on equity is the amount of net income returned as a percentage of shareholders equity. It measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested.

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.

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