Disney Shares Plunge on Estimates

Walt Disney Co. shares plunged Tuesday as six Wall Street analysts trimmed their 1998 and 1999 earning estimates for the company, mostly citing weakness in the entertainment giant’s film and video performance.

It’s the fourth time in the last month and a half that a series of analysts have trimmed their forecasts or lowered their ratings on Disney shares.

The stock tumbled $8.13, or 7.2%, to $105.06 in trading on the New York Stock Exchange. It has slumped 18% from its 52-week high of $128.38.

Disney, which has had a long drought of hits among its live-action films, today releases “Armageddon,” its most expensive movie ever and a major gamble for the company.

Disney has spent about $200 million in production and marketing costs on the film, which is about efforts to save Earth from an asteroid.

If “Armageddon” is a hit, however, Disney will reap more benefits than it normally would because virtually all of the profits go to the studio. In most major Hollywood films, stars, directors and others carve out a big chunk of the pie.

Separately, another recent Disney release, the animated feature “Mulan,” has performed better than expected and should generate substantial profits for the studio in film, video and merchandise revenue.

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So why the downward earnings-estimate revisions?

Prudential Securities analyst Melissa Cook cited weak sales of Disney’s home videos in the United States and disappointing results for international film releases, particularly “Flubber” and “Starship Troopers.”

Cook cut her fiscal 1998 estimate to $2.95 a share from $3.15 and her fiscal 1999 forecast to $3.50 from $3.75. But she maintained her rating of Disney stock at “hold.”

Three other analysts cut ratings on the stock, reflecting lower-than-expected profit at Disney’s creative-content division, which includes the company’s movie and video businesses.

Morgan Stanley Dean Witter analyst Richard Bilotti cut his estimate for Disney’s fiscal third quarter, ending July 31, to 68 cents a share from 71 cents, and his fourth-quarter estimate to 59 cents from 77 cents.

But Bilotti maintained his “strong buy” rating on the stock.

Analyst David Londoner at Schroder & Co. cut his full-year 1998 estimate to $2.90 a share from $3.11 and his 1999 estimate to $3.26 from $3.48.

Londoner also cut his rating on the stock to “perform in line” with the market from “outperform.”