Wednesday, May 12, 2010

Disney shares up a bit, as the studio segment shows signs of life...(DIS)

Yesterday, media giant and DJIA component Disney(DIS) reported fiscal q2 earnings of 48cents(excluding "items"), about 3cents ahead of Wall Street expectations.  Revenue of $8.58billion came in slightly higher than expected.

Affiliate fees at ESPN and royalty revenue from Marvel, combined with a successful Alice in Wonderland box office pull contributed to the quarter's results.  The improved studio results are refreshing, especially after operating income in that segment fell to $175million in fiscal 2009 from $1.1billion in 2008...

Still, the real monster (in a good way) for this company is the media networks segment, which includes the Lifetime channel without which I would not survive...

I think Disney shares rate a "lukewarm," meaning I don't want to buy them at this level, but they won't hurt one's portfolio.  The dividend yield is inappropriately minuscule at 1%, and Free Cash Flow Yield(FCFY) is about 7% - depending on where CAPEX comes in this year.  The company's borrowing rate (2013debt) is in the 2.3% range, so if discretionary travel and general economic activity pick up, the FCFY could fall (sending shares up).  One positive is that the shares are trading at 15x 2010 earnings while the studio division is still floundering...a recovery there could send shares higher, and give the "Disney premium" multiple the stock once enjoyed.

(click image below for a "DIS to-go" tear sheet)
Copyright 2010 AlphaNinja

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