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Disney Flat, But Still The Star

Posted: Feb 17, 2010 11:13 AM by Greg Sushinsky

Tickers in this Article: AAPL, CBS, CVC, DIS, TWC

The Walt Disney Co.(NYSE:DIS) produced a flat first quarter as customers continued to shy away from spending at its theme parks and movies. The bright spot for the entertainment giant was its cable television. The company's long-term prospects are still very intriguing.

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Travel And Box Office Down
Disney earned a net income of $844 million for its first quarter. Excluding one-time items, this was 47 cents per share compared with 41 cents last year. When those items are included, earnings per share would have been 44 cents this quarter compared to 45 cents last year. Although the figures beat analyst expectation, the earnings per share reflect poor growth in the company regardless of how they are calculated, and the slight increase in revenue can't make up for this.

Theme park attendance was down. The company plans to cut back on its discounting. The movie studio, which has had a rough year, saw nearly flat revenues - only rising by 1%. Cost-cutting as well as promising new releases on tap such as "Toy Story 3" and "Alice in Wonderland" should help going forward. For the longer term, investors should remember Disney now has the Marvel properties that may pay off handsomely. Disney's best performer ESPN and the Media network's division revenue climbed by 7%, up to $4.18 billion.

Sports On The Rise
Disney wasn't the only media company to benefit from an upsurge in sports broadcasting. CBS (NYSE:CBS) turned in record ratings for its Super Bowl telecast. Sports figures into potential media changes, as Cablevision (NYSE:CVC) may be willing to part with its cable assets to concentrate on its sports properties. Cablevision currently owns the New York Knicks, New York Rangers and Madison Sqaure Garden. A potential buyer for the cable assets might be Time Warner Cable (NYSE:TWC). Cablevision's Long Island business would fit nicely with Time Warner's New York holdings.

Media Due To Rise?
Media and entertainment companies are stirring, but their business is not yet rising. With Disney especially, there is promise on the horizon. In a far-flung view, Disney's CEO Robert Iger spoke of the possibilities for synergies with digital content delivery via Apple's (NASDAQ:AAPL) iPad. As for Disney's amusement parks, which are vacation destinations, Disneyland and Disneyworld remain terrific attractions. These should benefit when the economy picks up and consumers emerge from their economic bunkers and start doing a bit of travel. The Disney movie studio has been in a makeover during the bad economy. It cut costs while continuing to produce creatively. Marvel properties should contribute a boost to this when they're integrated. And there's no reason Disney's cable division won't keep producing robust revenue while the rest of its divisions wait for the economy to start catching up.

The Bottom Line
Disney is still the best of the media companies, with more things going for it than any other. Its divisions fit together with superior synergy. Its television division has essentially hedged the other lagging divisions through this recession - something a classic conglomerate that works should do. Disney's assets are considerable and its brands are unassailable. Watch for the mouse to roar when the economy starts picking up. (The glitz and glam of Hollywood could help put some more glitz in your pocket. To learn mroe, read Analyzing Show Biz Stocks.)

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By Greg Sushinsky

Greg Sushinsky is a passionate independent investor, who has done his own research, analysis and investing for 20 years. One of his earliest investing memories was when he first saved and bought U.S. Savings Bonds with his own money as a small child. From there, he studied investing on his own and made small stock purchases as he grew as an investor.

Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.

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