Disney Gains Heading into Earnings Call

NEW YORK ( TheStreet) -- The Walt Disney Co. ( DIS) wants you to believe that it's different, and quarterly earnings from the world's largest entertainment company are sure to show a big gain for its movie studios, a stark contrast to declines at the film units of rivals Viacom Inc. ( VIA)and Time Warner ( TWX).

The anticipated gain for Disney's Studio Entertainment unit will be mostly due to a quarterly comparison with the $84 million writedown incurred as a result of the flop known as John Carter. The Carter fiasco placed the film in the infamous company of Ishtar and Heaven's Gate for movie losses. Disney is scheduled to report its fiscal second quarter earnings after the close of trading today in New York.

Disney gained 1.6% to $66.07 Tuesday to extend its advance over the past 12 months to 51%.

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As a result of the comparison, Michael Nathanson, media analyst at Nomura Equity Research, is expecting Disney's Studio Entertainment to show a profit rebound of $17 million, and that turnabout should help the company's overall numbers.

Across the industry, film studios continue to underperform other parts of the media conglomerate's various businesses. Viacom's Paramount Pictures reported declines in revenue and operating income while sales dropped at Warner Bros. as a result of disappointing numbers for Jack the Giant Slayer and Gangster Squad.

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Disney did get a big boost over the weekend from Iron Man 3, which posted $175 million in U.S. revenue for its debut, second highest ever to only The Avengers. Worldwide, Iron Man has already brought in $680 million. Of course, those millions won't be included in today's report as they'll be applied to the current quarter.

Much of Disney's growth remains powered by its amusement parks and ESPN. The Burbank, Calif.-based company's fiscal second-quarter results are expected to reflect those strengths. Advertising at Disney's cable networks is forecast to reach 7% while affiliate fee revenue is forecast to grow 12%, Nathanson said.

Overall, Disney is expected to report an 8.8% gain in sales to $10.5 billion, according to the average estimate of 25 analysts surveyed by Bloomberg. Operating income is forecast to reach $2.4 billion while earnings per share will total 77 cents per share, according to Bloomberg analyst surveys.

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Nomura is forecasting Disney's sales for the first three months of 2013 to have reached $9.6 billion, a 9.4% increase from the same period a year ago. Nathanson also anticipates earnings of 77 cents per share.

On the call, Chief Executive Robert Iger is likely to talk up the performance of the company's cable-TV networks as well as ABC. ESPN benefited from sporting events such as the Super Bowl and the NCAA basketball tournaments. One setback for Disney was the decision to postpone the release of its Infinity video-game system to August rather than June. Infinity is expected to bolster revenue at the company's Interactive unit.

"We expect fiscal second-quarter to be an inflection point for the company, with the step-up in underlying affiliate fee growth, as the Comcast / ESPN deal along with other smaller multi-channel distribution deals kick in," Nathanson wrote in an investor note.

Written by Leon Lazaroff in New York