Disney Clears Profit, Revenue Targets

The company's parks and broadcasting segments saw their revenue and operating income fall.

Author:: Rebecca Byrne
Publish date:: Apr 25, 2002 6:06 PM EDT

Updated from 5:13 p.m. EDT

Walt Disney

said its second-quarter profits declined from last year because of weak advertising at broadcasting unit ABC and low attendance at its theme parks, but the company's results still topped analysts' expectations.

The Burbank, Calif., company reported a profit of $259 million, or 13 cents a share, reversing a loss of $449 million, or 22 cents a share, in the year-ago period. Excluding various items and costs, the company earned $524 million, or 25 cents a share, in the year-ago quarter. Revenue fell to $5.90 billion from $6.05 billion last year.

Analysts polled by Thomson Financial/First Call had pegged the media giant's earnings at 10 cents a share on revenue of $5.6 billion.

"We continue to see encouraging signs in our Parks and Resorts unit, and we are highly focused on addressing the challenges at the ABC network. Consequently, we anticipate continued improvement in the company's performance," Chairman and CEO Michael Eisner said in a statement.

Revenue for the parks and resorts segment decreased 8% in the quarter to $1.5 billion and operating income fell 15% to $280 million, reflecting the continued disruption in travel and tourism. Broadcasting revenue fell 9% to $2.2 billion, and operating income slid 39% to $309 million.

"The losses at the broadcasting unit weren't as bad as expected and park

attendance has been getting better, but we're still not getting the international travelers," said Paul Kim, an analyst at Kaufman Brothers.

Kim said international travel at the U.S. theme parks still hasn't recovered from the Sept. 11 attacks and is down roughly 20% to 25% from last year.

He also noted that second-quarter comparisons were helped by some seasonal factors, like the spring-break holiday, which took place earlier this year than last year.

Regarding its outlook, Disney said it expects to report a drop in operating income in the fiscal third quarter but said it expects a "substantial" improvement in fourth-quarter results. The company had previously said it expected operating income to fall 15% in its fiscal third and fourth quarters from last year.

The company projected that advertising sales at its broadcasting unit would rise later in the year and said pricing may increase in the single digits. Disney President and Chief Operating Officer Robert Iger also said the outlook for the industry is "upbeat."

Kim at least wonders whether all the good news -- an expected turnaround in advertising and theme park attendance -- has already been factored into the share price. "At what point do you say the valuation is just too high," Kim said. "Disney isn't a growth stock."

Disney currently trades at 39 times 2002 projected earnings.