Tuesday, February 9, 2010

Disney reports revenue and earnings upside, shares flat after-hours (DIS)

DJIA constituent Walt Disney (DIS) reported adjusted EPS of 47cents for 2010's first quarter, coming in well ahead of the street consensus of 38cents.  Revenue of $9.74billion beat estimates by $10mil.

Studio Entertainment showed the best year-over-year improvement:

Studio Entertainment revenues for the quarter were essentially flat at $1.9 billion and segment operating income increased 30% to $243 million. Higher operating income was primarily due to an increase in domestic home entertainment, partially offset by decreases in domestic theatrical distribution and music distribution.
Higher domestic home entertainment results were primarily due to lower distribution costs and marketing expenses, driven by cost reduction initiatives, and lower production cost amortization and participation expense. The decrease in amortization and participation expense reflected the strong performance of Up andThe Proposal in the current quarter compared to WALL-E and The Chronicles of Narnia: Prince Caspian, which had high participation costs, in the prior-year quarter.
The decrease in domestic theatrical distribution was driven by higher film cost write-downs in the current quarter. Lower results in music distribution were primarily due to lower album sales reflecting the strong performance of High School Musical 3 in the prior-year quarter.

The Parks & Resorts segment did ok domestically, but Disneyland Paris was a drag.

What we're left with is slow-moving Disney, fighting the good fight in a brutal environment for discretionary spending of this sort.  Annual Free Cash Flow should run just a tad over $3billion, so the Free Cash Flow Yield of 5.6% (even netting out cash to boost the yield) doesn't entice me.  Nor does the 1.2% dividend yield .  The best "upside catalyst" possibility for this stock would be investors falling back in love with it, and assigning the old "Disney Premium" of a forward PE in the 17ish range.  Not for me....

Copyright 2010 AlphaNinja

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