LOS ANGELES (Reuters) – Wall Street expects second- quarter profits at The Walt Disney Co. to be about even with a year earlier, driven by movies such as "Wild Hogs" and strong ABC television advertising sales.
Total earnings are expected to rise, but the infusion of new shares from Disney's $7.4 billion all-stock acquisition of Pixar Animation Studio last April will dilute earnings per share.
Prime time television ratings this season are down at major networks, but several analysts have raised estimates for Disney's adjusted profit on the strong advertising sales, with the Wall Street consensus at 37 cents per share, in line with a year ago, according to Reuters Estimates.
Disney's movie studio has cut costs and recent moderate- budget movies have done well.
Deutsche Bank analyst Doug Mitchelson saw strong momentum across all Disney businesses and raised his second-quarter profit forecast thanks to buddy movie "Wild Hogs," which has taken in about $215.5 million worldwide, and on ABC prices in the spot buying, or scatter market.
Other analysts also mentioned the success of the relatively low-cost "Bridge to Terabithia" and a smaller film slate, as well as lower overhead from last summer's restructuring as possible reasons for wider margins at Walt Disney Studios.
Mitchelson also forecast that Pixar would reduce Disney earnings per share by 3 percent in the quarter due to the larger number of shares outstanding.
He reaffirmed a "buy" rating on Disney shares and a price target of $42, saying the company has shown its "terrific content cycle has legs (and) its favorable asset mix implies above-average growth."
A Disney spokesman declined to comment on earnings ahead of the company's announcements of its results, scheduled for Tuesday.
Sanders Morris Harris analyst David Miller also inched up his earnings forecast for Disney in March, responding to what he described as "stronger-than-expected pricing strength in the network scatter market" at ABC prime time.
ABC also appeared to be profiting from a bonanza in movie advertising for a summer's worth of blockbuster films, he said.
Miller said the company faces "very tough" year-over-year comparisons in the some or all of its business for the next five quarters.
CIBC World Markets analyst Jason Helfstein also noted that Disney faces difficult comparisons at its broadcast, movie studio and parks divisions. He described the broadcast division as "the wild card" for the quarter.
"It is unclear whether weaker network ratings will impact this quarter's results, or (the third quarter)," Helfstein wrote in a note to clients.
Investors may also be watching for the impact of a ticket price increase at theme parks and the effect of the Year of a Million Dreams promotion at Disney's theme parks.
Goldman Sachs analyst Anthony Noto expects double digit segment operating income growth at all of Disney's businesses except Media Networks, which should see high single digit growth.
Noto, who has a buy rating on Disney, said Media Networks would be positively affected by the lack of Super Bowl and ESPN Mobile investments, as well as the start of its new TV deal with NASCAR.
Disney shares were trading up 0.9 percent, or 32 cents, at $36.17 on Monday on the New York Stock Exchange.
