Analysts Get Encouraged by Disney Park Numbers

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Analysts get encouraged by Disney park numbers

By Russ Britt
MarketWatch
May 6, 2008


Wall Street analysts were a bit more optimistic Monday about theme park results for entertainment giant Walt Disney Co., as investors await news on the company's second-quarter results due after the close on Tuesday.

Concern seems to be fleeting over the possibility that results for the company's Walt Disney World in Orlando, Fla., and cornerstone Disneyland Resort in Anaheim, Calif., might falter in the face of recession.

Sluggish economic conditions often have a detrimental effect on revenue at Disney's theme parks, particularly its Walt Disney World in Florida. That facility took a hit in sales after the Sept. 11, 2001, terror attacks but has since recovered.

Richard Greenfield of Pali Research noted that the Orlando Sentinel reported over the weekend that March resort tax collections were up 5.1% year-over-year. He noted that the Easter holiday fell early this year, but said in a note to clients that signs are positive for the parks.

"Disney's theme park division remains investors' No. 1 concern, yet all signs point to Disney's fiscal second-quarter [ending in March] being quite strong, with theme parks likely to upside surprise," Greenfield wrote.

Disney expects to report its earnings after the close Tuesday. Analysts polled by FactSet Research are forecasting profits to come in at 51 cents a share on sales of $8.51 billion, compared with the 43 cents a share on sales of $8.07 billion posted a year ago.

Greenfield's estimate was 52 cents a share, but now he feels as though that might be conservative.

Jason Helfstein of Oppenheimer & Co. told investors that he now expects the company to outstrip earnings estimates, thanks to spillover earnings from such late first-quarter film releases as "National Treasure II" and international sales from "Enchanted." Helfstein says he sees no signs of general economic malaise affecting the parks, and increased his second-quarter estimates on the division's sales to $2.7 billion for the quarter, up from $2.6 billion, and operating income of $291 million vs. his previous forecast of $267 million.

Not all company watchers have been so optimistic.

Analyst Doug Creutz of Cowen & Co. recently said in a note to clients that big drops in consumer confidence often take their toll on Disney's parks. He wrote that similar drops in consumer confidence in 1990-91 and 2001-02 resulted in attendance drops of 10.8% and 4%, respectively.

Creutz forecast that Disney park sales and operating profits would be down 2.7% and 10%, respectively, as the company tries to cope with a 3.3% drop in attendance.

"We believe that Disney's parks and resorts segment is one of the most exposed business segments in the company to the impact of a potential recession," he wrote.

Doug Mitchelson of Deutsche Bank Securities was more optimistic in his assessment. He said in a recent note that Disney might have been able to take advantage of price increases due to recent strong attendance, though he acknowledged that the current economic downturn might not be the best time to test such a step.

Mitchelson also commented that Disney shares are at a low price-to-earnings ratio of 15. Disney stock reached that level during the 1987 stock-market crash, the 1990-91 recession and the 2001-02 recession.

In each of those instances, shares went up by a third within six months, he wrote. "We continue to believe that Disney has stronger long-term growth prospects than most investors expect."

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Disney expects to report its earnings after the close Tuesday. Analysts polled by FactSet Research are forecasting profits to come in at 51 cents a share on sales of $8.51 billion, compared with the 43 cents a share on sales of $8.07 billion posted a year ago.

No Recession Here -- Just Mice

The (Newark) Star-Ledger
Thursday, May 08, 2008

There are plenty of storm warnings from economists the nation is in a recession. But for some companies, that notion is downright Goofy.

Take Walt Disney, for example. The entertainment company blew away analysts this week with its quarterly earnings results. The company earned 58 cents a share, topping Wall Street estimates by 7 cents, while revenue came in at $8.71 billion, also beating analyst expectations.

Even the company's theme parks showed a 33 percent jump in operating profit, thanks in part to the weak dollar, which made a Disney vacation more affordable for European travelers.

Next week, the Disney movie machine is coming out with "The Chronicles of Narnia: Prince Caspian." Pixar's "Wall-E" arrives in theaters next month.

Disney also has some big money makers on the Disney Channel, such as "Hannah Montana," starring Miley Cyrus. The 15-year-old star caused a stir last week when she appeared in "Vanity Fair" wearing nothing but a sheet.

Yes, Disney's assets are a revealing look at the economy. Maybe too revealing.

-- Joseph R. Perone