Markets

Walt Disney: The Magic of Television

This media conglomerate is capitalizing on its small-screen stars.

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.

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

Most Popular

Is the Stock Market a House of Cards?
investing

Is the Stock Market a House of Cards?

The stock market volatility we’ve been experiencing and the apparent disconnect with the broader economy have some investors wondering just that. But …
October 12, 2020
Stock Market Holidays in 2020
Markets

Stock Market Holidays in 2020

Is the stock market open today? Take a look at which days the NYSE, Nasdaq and bond markets take off in 2020.
October 12, 2020
10 Worst Things to Keep in Your Wallet
Scams

10 Worst Things to Keep in Your Wallet

Storing your passport book or card, a spare key, or any of these other important items in your wallet leaves you open to identity theft -- or worse.
October 9, 2020

Recommended

Stock Market Today 10/26/20: Stocks Retreat as COVID's Second Wave Grows
stocks

Stock Market Today 10/26/20: Stocks Retreat as COVID's Second Wave Grows

Investors let go of stimulus hopes and embraced COVID fears on Monday as cases surged both in the U.S. and abroad.
October 26, 2020
The Best and Worst Presidents (According to the Stock Market)
Markets

The Best and Worst Presidents (According to the Stock Market)

Which American presidents oversaw the best stock market performances? Just for grins, let's see what a 'stock market Mount Rushmore' might look like.
October 26, 2020
Stock Market Today 10/22/20: Stimulus' Siren Song Pulls the Bulls Along
stocks

Stock Market Today 10/22/20: Stimulus' Siren Song Pulls the Bulls Along

Thursday's gains were driven by more positive language on stimulus negotiations, but an uncertain timeline kept those advances modest.
October 22, 2020
Where Millionaires Live in America
investing

Where Millionaires Live in America

Looking to rub elbows with the rich? These 15 metro areas have the highest concentrations of households with at least a million dollars in liquid asse…
October 22, 2020