Oh, Mickey, you're so fine.
On the week that
celebrates the 75th birthday of copyright-protected corporate icon Mickey Mouse, the company is also reporting financial results for Disney's fiscal fourth quarter.
With Disney's movie business on a roll, and with its theme park business showing slow and steady improvement, analysts are for the most part predicting improving fortunes for the company.
Yet Wall Street appears split on the outlook for the company's broadcast-TV operations, and some analysts opine that Disney's stock, up 53% over the past eight months, already reflects fiscal 2004's expected improvements.
Disney's shares traded at $22.75 Wednesday, up 23 cents.
At play in Disney's quarterly financials -- due to be released after the market's close Thursday -- are the same issues that were of concern to analysts when the company reported its prior quarter in August.
The highlight of the fourth fiscal quarter, which ended Sept. 30, is likely to be Disney's studio entertainment division, thanks to home video releases such as
The Lizzie McGuire Movie
, and feature films including
Pirates of the Caribbean
. J.P. Morgan analyst Spencer Wang, for example, recently raised estimates for the division to $2 billion in revenue, up from $1.9 billion in FY2002's fourth quarter, and expects earnings before interest, taxes and amortization -- Disney's and analysts' preferred cash flow measure -- to be $174 million, up from $75 million last year.
Meanwhile, the company's theme park operations continue their slow recovery from the difficulties created by a weak economy and travelers' anxiety. Analysts say occupancy rates in theme park hometowns of Anaheim and Orlando have been improving, but visibility into future business remains low, and attendance has been driven by a major promotional discount. Bank of America analyst Doug Shapiro, for one, expects revenue growth of 5% to $1.7 billion, and EBITA growth of 14% to $267 million.
Among analysts, the business with the greatest divergence in outlook is the broadcasting portion of the company's media networks division. The ABC TV network started the fall season out strong, but has been weakening subsequently, say analysts. Wang, for example, recently trimmed his broadcasting revenue estimate for the quarter to $1.21 billion, up 5% from last year, citing slower-than-expected revenue growth at ABC. He cut his bottom-line estimate to a $60 million loss, citing higher-than-forecast programming costs -- due in part to an increasing number of Monday Night Football broadcasts in the quarter.
But while Wang and SoundView Technology analyst Jordan Rohan were trimming estimates for Disney's broadcast division, Oppenheimer's Peter Mirsky was raising them; in a recent report, he said he was predicting the broadcast unit would almost break even in the fourth fiscal quarter.
Another area of uncertainty: Disney's relationship with
, the creator of
and other animated hits. Disney's deal to distribute Pixar's films doesn't expire until 2005, but analysts can't stop thinking ahead to what might happen to Disney should Pixar jump to another studio.
Analysts also wonder whether the expected continued improvement in Disney's performance in fiscal 2004 is already reflected in the stock price. With Disney trading at a roughly 11% premium to its peers on the basis of enterprise value divided estimated 2004 EBITDA, says Wang, "we believe the market has already discounted much of the expected earnings recovery in FY04." Wang has a neutral rating on the stock; his firm has done investment banking and underwriting for Disney within the past 12 months.
Meanwhile, SoundView's Rohan has an outperform rating on the stock. "Valuation is attractive as momentum builds at key business units," he writes. Rohan's firm hasn't done banking for Disney.
For the record, the Thomson First Call consensus is for Disney to report $6.99 billion in revenue for the quarter, up from $6.66 billion in the corresponding quarter a year earlier. Analysts expect earnings per share of 15 cents, up from 11 cents one year earlier.