These days, the magic of Disney lies in its television networks. The company's profits are climbing, largely because of rising subscriber fees at ESPN and increased advertising revenue at ABC, parent network of the hit primetime shows Desperate Housewives and Lost.
The Walt Disney Co. (symbol DIS) reported earnings for the quarter ended March 31 of 37 cents a share, 19% higher than the year-ago period -- and well above Wall Street's forecast of 31 cents per share. But the Burbank, Cal., media conglomerate reported lackluster sales during the quarter, mainly because of weak performance in its movie segment. Revenues grew a scant 3%, to $8 billion, missing analysts' sales estimates of $8.2 billion.
Despite the sales disappointment, Disney's share price has risen nearly 5% since the earnings announcement, to a 52-week high of $30. Analysts who raised price targets included Credit Suisse's William Drewry, who believes the shares are worth $41. "We believe that Disney is among the best positioned media companies long-term due to its domination in the two major content 'power alleys' of sports and family entertainment," Drewry told clients. He added that "strong shorter term earnings prospects should drive the stock higher." He reiterated an "outperform" rating for the stock and raised earnings estimates for the 2006 fiscal year ending in September from $1.39 to $1.50 per share. At $30, Disney's stock trades at 20 times Drewry's estimate.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Disney is probably best known for its theme parks, as well as its famous characters, which include Mickey Mouse, Winnie the Pooh, and the Muppets. Other segments of the company include films, television networks, and consumer products. Income for Disney's media networks unit jumped 20% in the January-through-March quarter. The company's theme-park division experienced a 7% gain, boosted by Disney's 50th anniversary festivities. During a conference call Tuesday, chief financial officer Thomas Staggs said he didn't expect higher prices at the pump to have a "meaningful impact" on theme-park attendance this summer.
Revenues at Disney's movie division were down 22% during the second quarter versus the year-earlier period. The company, which completed its purchase of studio partner Pixar this week, is optimistic about its summer film lineup, which includes the June release of Pixar's animated movie Carsand a later release of a sequel to Pirates of the Caribbean.
During the conference call, the company's chief executive officer, Robert Iger, added that Disney would continue to experiment with new business models in its media division. Disney was the first network to sell downloads of primetime television shows through Apple's iTunes store. Earlier this month, the company began offering streams of several ABC shows online for no charge.
--Katy Marquardt
-
Social Security New Rule: Overpayments Must Be Paid Back 100%. Why It MattersAs of March 27, the SSA will require beneficiaries who have been accidentally overpaid to repay 100% of the money, reversing a previous policy that allowed for only 10% recoupment.
-
Medicare and Medicaid Employees Offered New Buyouts: What You Need to KnowFederal HHS workers who inspect food, research diseases and administer Medicare and Medicaid are offered $25,000 buyouts
-
Stock Market Today: Stocks Waver as Big Tech Slumps on Spending ConcernsMarkets seesawed amid worries over massive costs for artificial intelligence and mixed economic news.
-
Is Disney Stock Still a Buy After Earnings?Walt Disney stock is down Wednesday after the entertainment and media company beat fiscal 2025 first-quarter expectations. Here's what you need to know.
-
Fed Leaves Rates Unchanged: What the Experts Are SayingFederal Reserve As widely expected, the Federal Open Market Committee took a 'wait-and-see' approach toward borrowing costs.
-
Stock Market Today: Tech Stocks Soar Ahead of CES 2025This week's annual technology event will give updates on AI, EVs and self-driving cars.
-
Fed Sees Fewer Rate Cuts in 2025: What the Experts Are Saying
Federal Reserve The Federal Reserve cut interest rates as expected, but the future path of borrowing costs became more opaque.
-
Stock Market Today: Stocks Pause Near Highs Ahead of Jobs FridayInvestors await a key data set with sentiment still broadly positive.
-
Disney Hikes Its Dividend: What This Means for Investors
Disney announced late Wednesday that it's raising its dividend by 33%. Here's what you need to know.
-
Stock Market Today: Stocks Slip After Powell Talks Rate CutsThe main indexes closed lower Thursday after Fed Chair Powell said there's no rush to cut rates.
