Why Is Everybody Picking on Disney?

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Disney (NYSE: DIS  ) is doing better than you think.

Sure, shares of the family entertainment giant have fallen by 35% since peaking in May. The first wave of headlines about its fiscal fourth-quarter report also haven't been kind.

  • "Disney's Not So Magical Moment," reads
  • "Disney Net Slips as Slump Hits Home," goes The Wall Street Journal.
  • "Disney Misses Estimates as Theme Parks Suffer," says CNBC.

Now, if I can just borrow Mickey Mouse from the media firing squad for a moment, I want to point out that the report released Thursday night was actually pretty respectable. Blindfold off, Mickey. Now run!

Did Disney's net slip? Sure. Posted earnings of $0.40 a share for the quarter did clock in well below last year's $0.44 a share. However, once you back out a $91 million bad-debt charge related to its unfortunate receivable from Lehman Brothers, and a favorable tax resolution from last year's quarter, earnings on a per-share basis actually rose from $0.42 to $0.43.

Are the theme parks suffering? That's debatable. The company's parks and resorts division posted a 7% increase in revenue. Operating income did drop 4%, but that's the result of higher labor costs and the spike in fuel costs at its cruise line (which have since retreated dramatically).

I'm not suggesting that everything is zip-a-dee-doo-dah-riffic at Disney. Even on an adjusted basis, this is the first time that Disney has missed analyst estimates since CEO Bob Iger took over.

However, where is the love for the dependable ESPN and Disney Channel cable revenue, which is helping soften the blow of lower ad revenue at ABC? Where is the euphoric applause for the boost in Disney's consumer-product division from the popularity of Hannah Montana and High School Musical merchandise? 

These aren't banner times in the media industry. News Corp. (NYSE: NWS  ) shares were slammed this week after the company talked down its guidance. CBS (NYSE: CBS  ) shares fell on the week, even after increasing initially when the company reassured investors that it would keep its beefy dividend. Others, like Time Warner (NYSE: TWX  ) and Viacom (NYSE: VIA  ) , are holding up with their steady cable properties, but also feeling the sting of the fading advertising market.

So hang in there, Mickey. Keep dodging the premature firing squad. Things aren't great, and they won't get any better in the near term. However, the haircuts on the share prices in the sector are wildly disproportionate to the slip in fundamentals.

Recession or worse, entertainment still matters.   

For related Foolishness:

Disney is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz is mad about the Mouse and owns shares in Disney. Rick 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.

Read/Post Comments (1) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 07, 2008, at 3:00 PM, IrvThal wrote:

    Why is everyone picking on Disney? Because underneath its cash-churning exterior lies the cold, dead heart that used to beat so vividly. Disney's massive, enormous challenge is this: Get the consumers BACK after they take an economy-induced break. Parks were the leading cause of worry for the analysts, and they're slumping. Disney is now resorting to tactics that only its competitors used to do, things like "Buy 4, Get 3 Free."

    Guess what? Consumers get USED to that. Universal has never been able to get rid of its deeply, deeply discounted annual passes ("buy one day, get a year free") because once fire sales like that happen, consumers would rather wait until the NEXT sale.

    Disney is botching this one big time. No noticeable capital improvement in most of its parks (but a waste of good money "fixing" California Adventure), dramatically increased costs, remarkably less impressive "cast members," and an incessant and sometimes painful insistence that the parks are for kids ... ignoring the core adult consumer who have traditionally (despite Disney's absolute insistence) been the biggest spenders and the most loyal consumers.

    Disney's theme parks division is suffering and it's going to get worse before it gets better.

    Combine that with slumping ad sales, a questioning by Tom Staggs of whether online ads are actually effective, and an ignorantly blissful Andy Mooney over at Consumer Products saying holiday 2008 is going to be GOOD for Disney ... and you can see that Disney's management is woefully out of touch with what its consumers and advertisers want.

    I predict much tougher sledding ahead for Disney this winter, and well into FY and calendar 09.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 772040, ~/Articles/ArticleHandler.aspx, 10/24/2016 8:13:01 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,223.03 77.32 0.43%
S&P 500 2,151.33 10.17 0.47%
NASD 5,309.83 52.43 1.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2016 4:01 PM
DIS $93.37 Up +0.34 +0.37%
Walt Disney CAPS Rating: *****
CBS $56.35 Down -1.31 -2.27%
CBS CAPS Rating: ***
FOX $25.67 Down -0.24 -0.93%
Twenty-First Centu… CAPS Rating: ***
TWX $86.74 Down -2.74 -3.06%
Time Warner CAPS Rating: ***
VIA $41.90 Down -0.15 -0.36%
Viacom CAPS Rating: ***