Disney Poised for Growth: Earnings Preview
NEW YORK (
) --
Walt Disney
(DIS) - Get Report
is poised to report improving trends in several key areas of its business when it reveals fourth quarter earnings tomorrow according to analysts.
While the media and entertainment company is expected to report earnings of 46 cents per share, flat with its 2009 fourth quarter results and in line with consensus estimates according to
Briefing.com
, analysts expect the company to show improvements in its theme parks and resorts division as well as its studio segment. A recovery in the advertising market is also expected to boost its cable and television segments.
|
Analyst Richard Greenfield of BTIG predicts that Disney will benefit from strong ratings at ESPN and improved sports advertising. In a Nov. 2 research report, Greenfield noted that both local broadcast and cable network advertising are experiencing strong year-over-year growth, with sports advertising as one of the strongest categories.
While ESPN programming costs continue to increase, Greenfield expects significant gains in its advertising segment will result in earnings growth in Disney's cable networks in 2011.
The company's parks and resorts segment is projected to see increases due to higher visitation and improved Disney World revenue per available room, or RevPAR, a key metric for hotel operations.
"Investors
are underestimating the leverage in theme parks," said Greenfiled in his note. "Tourism to Orlando has rebounded meaningfully over the past several months, driven by the opening of the Harry Potter at Universal and in part by vacation deferrals from 2009...Orlando visitation trends are encouraging across all metrics and we are starting to see airlines adding direct flight capacity to Orlando for the first time in awhile."
Analyst Matthew Harrigan of Wunderlich Securities estimates that fourth quarter 2010 revenue from Disney parks and resorts in Orlando, Fla will be up 1% to $2.9 billion from $2.84 billion due to higher revPAR at Disney World resorts.
Analysts forecast strong gains in Disney's studio segment to be driven by the success of Pixar's
Toy Story 3
, which brought in more than $1 billion in worldwide ticket sales in August.
Greenfield expects the
Toy Story 3
DVD, which was released today, will be a "catalyst" for studio profits in the first quarter of 2011. He also believes Disney will benefit from
Tron
, which will be released in December.
While Greenfield anticipates gains from the
Toy Story 3
DVD release, he believes the company could further benefit by making the movie available on-demand through cable and satellite outlets.
"
Toy Story 3
is hitting DVD today with the film available day-and-date via both
Redbox
and
Netflix
(NFLX) - Get Report
," Greenfield said in his report. "However, the film is not available via video-on-demand. Disney followed the same strategy with
Alice in Wonderland
, which we view as suboptimal to maximizing profits."
In the summer of 2011, Disney will likely benefit from the release of
Cars 2
and
Pirates of the Caribbean 4
, as well as from its ownership of Marvel releases,
Thor
and
Captain America
.
Harrigan expects fourth quarter earnings to come in at 47 cents per share, 1 cent ahead of consensus, based on the company's expected solid fourth quarter performance across several segments. He projects the company's total fourth quarter 2010 revenue will rise 3.5% to $10.22 billion from $9.87 billion in 2009. He lowered his earnings estimate to $2.09 a share from $2.11 a share.
Greenfield upped his 2010 earnings guidance to $2.09 per share from his previously projected $2.06 a share. He raised his 2011 fiscal earnings per share estimate to $2.55 from $2.50, on expected year-over-year operating income increases in the high teens. Harrigan's estimated 2011 full year earnings per share comes in at $2.46
Greenfield rates Disney as a buy with a price target of $42. Disney shares are down about 0.6% to around $36.65 in morning trading.
-- Written by Theresa McCabe in Boston.
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