Disney Doesn't Hit It Out of the Theme Park

Wall Street still hasn't come up with the kind of mousetrap that can catch Mickey Mouse, but it's getting close on the blueprints.

Disney (NYSE: DIS  ) once again topped Wall Street's profit targets -- something that shareholders have come to expect under CEO Bob Iger -- but the family entertainment giant didn't exactly hit it out of the theme park.

Operating profits mirrored the meager 2% revenue advance. Attendance fell at the company's stateside attractions. The company's studio entertainment division fell way short of last year's high bar. Operating profits at the broadcasting division fell, but it was ultimately saved by the robust performance of Disney's cable properties.

In short, it was a mixed bag.

Reported earnings clocked in at $0.66 a share, but then investors have to back out one-time gains that include the sale of movies.com to Comcast (Nasdaq: CMCSA  ) , the purchase of Disney Stores from Children's Place (Nasdaq: PLCE  ) , and a favorable resolution of outstanding tax items. Without that, Disney would have earned just $0.62 a share. It is better than the $0.61-a-share profit that analysts were expecting, but Disney doesn't usually win just by the skin of Goofy's teeth. It's typically been a blowout. Three months ago, Wall Street was looking for a fiscal second-quarter profit of $0.51 a share and Disney delivered $0.58 a share. The quarter before that, it was the media giant turning a profit of $0.63 a share, flying past Mr. Market's $0.52-a-share guesstimate.

Everyone knew that Disney's studio would be roughed up, bumping up against last year's Pirates of the Caribbean: At World's End. However, did anyone expect attendance at both Disneyland and Walt Disney World to come in lower? Disney faults the shift in the Easter holiday from April in 2007 to March in 2008, but perhaps the assumption that international tourists taking advantage of the falling dollar would offset flagging domestic demand is flawed. 

if it figures that it will help offset the stateside weakness.

It probably doesn't help that Nickelodeon parent Viacom (NYSE: VIA  ) reported healthier growth this week, actually growing in areas like video games and studio production where Disney took a step back.

This doesn't mean that investors should bail on Disney. The stock is too cheap, priced at just 14 times what analysts believe the company will earn this fiscal year. That may be a higher multiple than what media titans like Viacom, Time Warner (NYSE: TWX  ) , and CBS (NYSE: CBS  ) are fetching, but Disney remains the undisputed family entertainment giant. If Disney is still managing to inch higher in these trying times, just imagine what it can do when consumers start spending again.

M-I-C. See these other headlines:

Disney is a recommendation for Motley Fool Stock Advisor newsletter subscribers. You don't need a single Disney Dollar to try the service with a 30-day free trial offer.

Longtime Fool contributor Rick Munarriz can usually be found at Walt Disney World. He's the one wearing the "Bob Iger Fan Club" T-shirt. He does own shares in Disney. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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  • Report this Comment On July 31, 2008, at 1:19 PM, mzalbatross wrote:

    The last few months, Dizzy has been impeded by being in the Dow.

    Now, it starts to help!

    The Administration has more or less said that they are hell-bent on getting the Dow back to 13,000 before the election, which gives them very little time.

    One group of worldwide market movers hates the financials.

    A different group may not hate the energy stocks, precisely, but it doesn't want them to outperform.

    So what the heck is left in the Dow that nobody much minds being boosted?

    Among that group, Dizzy is perhaps the LEAST controversial.

    And after a Nowhere-Near-As-Bad-As-They-Had-Hoped-For report, the short side is actually pretty much lacking "conviction," compared to the long side.

    Dizzy is also among the leaders in consumer discretionary in general.

    I think the whole discretionary group starts to outperform, along with retail, the REITs, and anything infrastructure-related, because we are now getting stimulus-out-the-kazoo!

    The housing/GSE bailout is immensely stimulative - and bad, bad, bad for the dollah, if anyone were being honest.

    Obama has now joined Pelosi and Reid in calling for more consumer stimulus in the form of rebates and job programs.

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    Love and kisses.

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