Disney Shares fall, as profits rise

[offtheice]

Aug 11, 10:45 AM EDT

Disney Shares Fall Despite Higher Profits

By GARY GENTILE
AP Business Writer





LOS ANGELES (AP) -- Shares of The Walt Disney Co. slipped in Wednesday trading, despite higher profits and an upbeat outlook from the media giant.

A jump in theme park attendance and growth in cable networks boosted the media giant's profits by 20 percent in the third quarter. Disney earned $604 million, or 29 cents per share, for the quarter ended June 30, compared with $502 million, or 24 cents per share, in the same period last year, the company reported Tuesday.

Revenue climbed 17 percent to $7.471 billion from $6.377 billion in the same period last year.

The results beat expectations of analysts surveyed by Thomson First Call, who had expected earnings of 27 cents per share.

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Still, Disney shares fell 53 cents, or more than 2 percent, to $21.91 in Wednesday trading on the New York Stock Exchange.

Disney's theme parks should continue to drive growth over the next year, especially as they launch a worldwide effort to celebrate the 50th anniversary of Disneyland, said Peter Jankovskis, director of research for Oakbrook Investments in Chicago and co-manager of the AmSouth Select Equity Fund.

Disney Chief Financial Officer Thomas Staggs said profits are on track to increase by double digits through 2007, with record cash flow expected next year. Some of that cash will be used to increase Disney's dividend and buy back stock, Staggs said.

Disney wrote off $56 million during the quarter related to the closing of many of its retail stores. More write-downs in the future are a possibility as the company negotiates a sale of the chain to The Children's Place.

The strong third-quarter profits were powered by a 20 percent rise in operating income at Disney's theme parks, primarily Walt Disney World in Florida, where attendance rose 20 percent during the quarter. Attendance rose only 1 percent at the Disneyland Resort in Anaheim after the company decided to limit discounts, but per capita spending rose 8 percent.

Overall, Disney's parks reported operating income of $421 million, compared with $352 million in the same period last year.

Income also rose 15 percent, to $673 million, at Disney's media networks division, which includes the still-troubled ABC Television network as well as such cable outlets as ESPN and the Disney Channel.

Profits at the Disney Channel could be squeezed next year as the company invests $100 million on 15 to 20 new animated shows designed to create new character franchises, Disney President and Chief Operating Officer Robert Iger said during a conference call with analysts.

Advertising revenue increased 32 percent at Disney's ABC Family cable channel in the third quarter and the addition of the WB's "Smallville" and "Gilmore Girls" to the fall schedule should boost earnings even further, Iger said.

Disney's studio entertainment operations saw strong revenue from the sale of DVDs, but operating income dropped to $28 million from $71 million because of such theatrical flops as "Around the World in 80 Days" and "The Alamo."

Disney's results did not please all.

Former board member Roy Disney, who resigned last fall to mount a campaign to oust Chief Executive Michael Eisner, issued a statement questioning next year's growth prospects.

For the first nine months of the year, Disney reported net income of $1.829 billion, or 88 cents per share, compared with $852 million, or 42 cents per share in the same period last year.

Shares of Disney rose 50 cents to close at $22.44 on the New York Stock Exchange before the results were released. They fell 4 cents in extended trading.

© 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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[rocketriter]

The long-term success of a corporation depends much more on its strategy, net profit and growth than on its stock price. So I'd just look on the current situation as a great time to buy more Disney stock.

 

[kweaver]

Come on...practically everything is down this morning!

 

[PamOKW]

The key for DVC'ers is that theme park attendance is back on the rise. When things return to the "new normal" (since it'll be a long time before we live like we did pre-9/11), I suspect that resort rates will start to rise again with fewer and fewer terrific "deals". We'll be even happier campers when moderates are running over $200 per night.

 

[lillasmom]

Originally posted by PamOKW
The key for DVC'ers is that theme park attendance is back on the rise. When things return to the "new normal" (since it'll be a long time before we live like we did pre-9/11), I suspect that resort rates will start to rise again with fewer and fewer terrific "deals". We'll be even happier campers when moderates are running over $200 per night.

Agreed!

 

[Mike]

Originally posted by PamOKW
The key for DVC'ers is that theme park attendance is back on the rise. When things return to the "new normal" (since it'll be a long time before we live like we did pre-9/11), I suspect that resort rates will start to rise again with fewer and fewer terrific "deals". We'll be even happier campers when moderates are running over $200 per night.

That's exactly what I took away from the article as well.

 

[Sarangel]

Here's Roy & Stan's response to the earnings report:

The Disney earnings conference call boiled down to one fact concerning the Company's future performance: Trust us.
Michael Eisner, Bob Iger, and Tom Staggs discussed "financial metrics," "growth targets," "ROIC," and other business-sounding terms, but buried in this jargon was one piece of real news: The rate of growth is over at the Company. The studio's miserable box office performance and ABC's ongoing ratings nightmare, and the slowdown at the Parks should make all shareholders wonder, "Where's the growth?"

The Company is still riding the wave of DVD sales from last year's theatrical film successes (Pirates of the Caribbean, Finding Nemo), but considering the dismal box office performance this year and the lack of obvious growth throughout the Company, 2005 will not be a growth year and, in fact, the party may be over. But, apparently, the response of management is "Trust us." Never mind management's failures over the last 8 to 10 years, stockholders are being assured that there is a plan and we should just trust the Eisner team.

We ask management: "Why?"

The passive Mitchell Board of Directors has turned a blind eye to the dismal performance of management -- including the failures this year alone at Euro Disney, the ABC Network, the ABC Family Channel, the Disney Stores, and the Film Division. This Board has failed shareholders and continues to be the enabler of a flawed management team.

We ask the Board: "Why?"

 

[WDSearcher]

Roy and Stan's response would mean more if thre had been any activity out of the "Save Disney" camp lately. It seems as though their entire purpose these days is to wait for a positive Disney article and then issue a statement that cuts it down. I see them being very REactive, but would prefer it if they were a bit more PROactive.

I'm sure it's frustrating for them that Eisner is still there, and it probably doesn't help that the earnings reports are generally good and that TV critics are actually kind of looking foward to the new ABC season. But I'd sure like to see a "what we've been working on" report from them.

 

[raidermatt]

Agreed, Roy and Stan had their chance to lay the hammer down, but didn't have a plan to do it.

Their only chance now is if results are subpar leading up to next year's meeting.

Come on...practically everything is down this morning!

True, but Disney was down more than the average. Not that one day proves anything one way or the other. The only thing it shows is that stockholders are still concerned about the company's future growth. Maybe not to the extent of Roy and Stan, but concerned nonetheless.

One of the reasons for their success this year is the video sales from their successful box office year last year. There appears to be no way they will match that next year. They could still manage a couple of hits, but nothing like what they had this year.

If next year's box office does not rebound significantly for them, they won't have the video sales to carry them.

Park attendance is on the rise, but lets face it, it fell a long way, so it has a long way to go. But I think a concern everybody has is the economy and terrorism. Disney cited those things as the primary reason for their attendance issues for several years. Certainly that was at least somewhat justified, but with terrorism warnings all over the media, and with questions surfacing again about the economy, there has to be some doubt in investors minds. Disney has basically admitted that they cannot do well when the environment is rough.

That's the problem when you claim to be at the mercy of outside influences...

 

[KNWVIKING]

I think people are starting to look at the various terror threats as "crying wolf". Yeah we hear them,yeah we're a little concerned, but no it won't stop me from going to WDW. HOWEVER... that will all change when the next bomb goes off, IF it ever does. I think the parks can still thrived in a slowed economy, but another attack will cripple them, especially if an attack takes place at an entertainment venue like Vegas.

As far as Disney's current money makers, to me it seems as though each division booms at a different time. Last year parks and video were so so, but movies were breaking records. This year the parks are better, movies are a bust, but vids are booming. Next year maybe the parks carry an off vid & movie year, or movies rebound.

Can you imagine the potential if they ever start hitting on all eight cylinders again.

 

[Planogirl]

People may be hitting the parks in droves because they haven't been in a while.

I'll reserve judgment until the attendance stays up, the movies bounce back and ABC actually produces. But I personally won't like $200 for a moderate!