Disney may see decline in earnings

LOS ANGELES (MarketWatch) — After several quarters of solid growth, investors may find Walt Disney Co. stopped to take a breath during the second quarter, analysts say.

The Burbank, Calif.-based entertainment giant will announce its earnings after the close Tuesday, and it could see a decline in net profits from the same period last year.

While analysts polled by Thomson First Call expect, on average, earnings of 31 cents a share, many are predicting the company will fall just short of that goal.

The culprit: rough comparisons for Disney’s (DIS :29.21, +0.44, +1.5% ) studio operations, as well as a possible growth slowdown for the company’s cable networks and consumer products units. Those could offset Disney’s gains at the ABC Television Network and its theme parks.

“We are expecting Disney’s operating income and [earnings per share] to decline this quarter,” Vijay Jayant, analyst at Lehman Bros., said in a note to clients on Monday.

He later added: “We look for double-digit revenue growth from [its] media networks [division], primarily driven by ratings growth at ABC, but we believe timing issues at ESPN could result in a softer [operating income] performance, holding growth to 3.8%.”

Jayant was echoing the sentiment in a May 3 note from UBS Securities’ Aryeh B. Bourkoff.

“Growth is likely to be offset by challenging theatrical & DVD comps at the studio,” Bourkoff said in his note.
But the analysts say Disney should be on track to meet its goals of double-digit earnings growth for the fiscal year, which ends in September.

The company just finished its merger with Pixar, and will begin to realize gains from that buyout during the current quarter and into the fourth quarter.

“Disney is less dependent on ad recovery, especially [with the] expected completion of the Pixar deal in May, which we believe could drive growth not only at studio, but across all businesses,” Goldman Sachs’ Anthony Noto said in his note. “We expect the June 9 release of “Cars” to be an important data point to monitor.”
Disney shares were up more than 1% in recent action.