Maven: Everyone's Dizzy Over Disney

The media missed the mouse's prospects for lack of growth next year. Plus, Cisco.
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Far be it for The Business Press Maven to knock

Disney's

(DIS) - Get Report

earnings, widely reported as great across the board, with too heavy a fist.

But let's take a quick look at this morning's reporting on the earnings to show you two things:

    The business media can be wrong, even when they are right.

    There is a difference between decent earnings (Disney) and really strong earnings (say, Cisco ), and that's a distinction that should be clear in print.

    Such subtleties were not apparent in a

    MarketWatch

    report on Disney, which was too breathless by half and thus misled investors. Take the headline (puh-lease):

    "

    Walt Disney profit doubles on across-the-board gains

    "

    Read that, and you'd want to sell off the firstborn to buy some stock, no?

    When a company with plenty of divisions shows across-the-board strength, I want me some of that.

    My appetite was whetted further when I saw this lead: "Walt Disney Co. (DIS) said Thursday that its fourth-quarter profit more than doubled, jumping by 106%, thanks to across-the-board growth at its studios, parks and media networks."

    Digesting that, The Business Press Maven exclaimed, "Holy broad-based strength!"

    Unfortunately for Disney -- and

    Marketwatch

    , for that matter -- The Business Press Maven actually reads

    SEC

    filings.

    When you read as much from the business media as I do, you learn to give original documents a going-over.

    Anyhow, in the

    filing

    is where I first saw what everyone reported: total operating income for the quarter was $1.632 billion, up from $880 million for an increase of $752 million.

    Not too shabby. As I said: These were decent results.

    But dig just a bit further (not too much further -- page two of the SEC document) and you'll find income from studio operations.

    There, operating income swung from a loss of $313 million to a profit of $214 million. That's an increase in operating income from studio operations of $527 million.

    And what, pray tell, is the significance of that $527 million number?

    Well, boys and girls, it's about 70% of the $752 million increase in operating income.

    In other words: Though

    MarketWatch

    was technically right in that Disney showed growth in its studios, parks and media networks, the vast majority of the growth was in the studio segment.

    This is essential in understanding how lasting these better earnings might be.

    In any circumstance, studio results are a bit of a crapshoot from year to year.

    They sit in the saddle of luck and are prey to forces a bit beyond any company's control.

    And, as the

    Associated Press

    was right to

    point out

    , studio results were helped by favorable comparisons with last year.

    Looking forward?

    Well, to cut costs, Disney will be making fewer films in the coming year.

    So while

    MarketWatch

    was technically right about Disney showing strength across the board, there may less there than meets the eye.

    The Business Press Maven looked for holes in Cisco's earning and couldn't really find them.

    I did find a hole in coverage of the earnings, however, as well as a prime example of thorough and responsible coverage of such good earnings.

    First, as always, the hole. When it comes to earnings, The Business Press Maven often takes advantage of the access the Internet gives to the hometown paper of any given company.

    Sometimes, a local business journalist has been covering the company for a long time and has the best sources and natural sense -- the best bead on what's going on.

    Other times, they are a "homer," giving overly positive coverage, getting too close to their sources and warping natural sense with misplaced loyalty.

    When it comes to Cisco, the San Jose, Calif.,

    Mercury News

    , in Cisco's backyard, just went through the motions of brining up a possible negative to the earnings.

    Way down at the bottom of an

    article

    titled "Cisco profits, stock soar: Company achieves momentum by building on core business with new products," we are told that "while Cisco's investments in the new technologies and a bigger sales force appear to be paying off, analysts warn investors not to get too comfortable."

    A grand total of one analyst is then quoted before the article ends. And what detail does he go into about what investors should be on the lookout for?

    What nugget of coming truth does he allow us in on?

    Sayeth the analyst: "Enjoy it while you can -- it ain't going to last like this forever. At some point, growth slows and expectations get ahead of themselves."

    But have they? Why? What should we look out for?

    Can the best and brightest, a reporter and a Wall Street analyst (note the sarcasm) working together to think critically about Cicso's earnings, only come up with the old "no tree grows to the sky"?

    Compare that with a

    SmartMoney

    piece

    by Will Swarts.

    After an un-punny lead about how investors "routed" Cisco's stock, Swarts has some fun with the overheated headlines of bullish Wall Street reports such as "Honey, I Shrunk the Competition."

    Then he gets to work, noting clearly that there was much to like though, as he adds with the light touch it deserves, "a few issues bear continued attention."

    Like the fact that trees don't grow to the sky?

    No, Swarts brings up detail, noting the ever-so-slight dip in margins and considering whether Cisco will curtail its stock buyback.

    Warts, Swarts -- whatever your name is, if more reporting about earnings was that simple and complete, pointing out what happened and what might be future cause for concern, The Business Press Maven wouldn't have such an ax to grind.

    Of course, I'd probably be out of business too.

    As originally published, this story contained an error. Please see

    Corrections and Clarifications.

    A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of Fertilemind.net, a financial Web site twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children.