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Walt Disney: No Summertime Blues

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Life is good at Walt Disney (NYSE: DIS  ) . It's summertime and the livin' is easy.

For now.

Walt Disney has its fair share of notable challenges looming across its divisions. Yes, the U.S. economy is reportedly getting better all the time, but are the improvements enough to help spur the company to enjoy a strong season at its theme parks and resorts?

ESPN remains a growth engine to envy. But what about the broadside threat of News Corp.'s Fox Sports 1 cable channel, which will launch on Aug. 17? Will it open with enough of a splash to take headlines -- and possibly advertising business -- away from The Worldwide Leader in Sports, as ESPN likes to call itself?

And will Walt Disney's movie business remain as strong as iron? Right now, this question appears to be the least of Walt Disney Chief Executive Bob Iger's worries. Iron Man 3 had a sensational domestic opening recently, boasting nearly $175 million. It generated the second-largest opening weekend in history, topped only by The Avengers -- another Walt Disney blockbuster. Iron Man 3 garnered more than $525 million outside the United States.

Walt Disney can also look forward to Thor: The Dark World in November, Captain America: The Winter Soldier in 2014, and The Avengers 2 in 2015.

Much of Walt Disney's near-term prospects, however, center on its sprawling theme parks business. Iger hinted on the May 7 earnings call that something big might be in the offing: "In addition to the Star Wars feature films that we've already talked about, we're also working on opportunities for television and our parks. It's still very early in the process."


That could be a blockbuster in itself. A generation of nostalgic baby boomers would likely flock to a Star Wars theme park attraction, trying to relive the glorious times that they had following the 1977 release of the first Star Wars film.

In the most recent quarter, Walt Disney reported that its parks and resorts division had a strong three-month period, with revenue up 14% and operating income advancing by 73%. The gain in operating income came as a result of growth in domestic operations, thanks to higher attendance figures and guests spending more money at Walt Disney World and the Disneyland Resort.

Walt Disney executives had to feel encouraged by the title alone of media analyst Tony Wible's investment report for Janney Capital: "Disney Parks the Mouse's Powerhouse."

At such a time of economic uncertainty as this, Walt Disney will take any theme-park advantage it can get.

It's a good bet that the company will continue to rack up huge box-office results for its Avengers and Iron Man film franchises. In the entertainment industry, nothing quite succeeds like an established winner, and these two movie properties are as close to sure things as you're going to find in up-and-down Hollywood.

As successful as these franchises have been, Wall Street may reach a point eventually where it begins to take the films for granted and almost expect blockbusters every time out. This has more to do with Wall Street's invariable philosophy and mantra of "What have you done for me lately?"

But the theme parks are more quixotic and chancy. A sudden snap of bad weather could depress theme park attendance. A sharp downturn in the economy could keep Americans closer to home. High gas prices, likewise, could discourage families from going cross-country and keep them on staycations.

Walt Disney's theme park business is the joker in the deck because of the higher level of uncertainty than we see at ESPN or in its filmed entertainment division.

Walt Disney CEO Bob Iger has routinely received high marks from Wall Street because of his penchant for meeting investors' expectations -- and often outright exceeding them. The way Iger sees it, Walt Disney is holding a strong hand, even with the uncertainty of the theme park business.

How should you play your cards with Disney?
From its vast catalog of characters to its monster collection of media networks, much of Disney’s allure for investors lies in its diversity, and The Motley Fool's premium research report lays out the case for investing in Disney today. This report includes the key items investors must watch as well as the opportunities and threats the company faces going forward. So don't miss out -- simply click here now to claim your copy today.

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