Disney Results Expected to Be Bleakest Since 1993
Bruised by fallout from last month’s terrorist attacks, Walt Disney Co. is expected to report one of its bleakest quarters in nearly a decade.
Wall Street analysts expect Disney to post earnings of 7 cents a share in its fiscal fourth quarter ended Sept. 30, down from 16 cents during the same period a year ago, according to tracking firm Thomson Financial/First Call.
And if Disney’s earnings match the reduced estimates, it will mark the company’s weakest quarter since 1993, when it recorded huge losses from its EuroDisney theme park.
Disney is expected to release its financial results next month.
This month, influential entertainment industry analysts slashed by half their short-and long-term earnings estimates for Disney, citing a downturn in advertising revenue at its television subsidiary ABC, sharp declines in Disney’s theme park income and write-downs in the company’s film division.
Disney is expected to post a profit of 74 cents a share for its fiscal year, according to First Call’s consensus outlook, versus 73 cents per share in 2000.
The company has been hard hit because of its dependence on tourism and TV advertising. Travel jitters have sharply cut the number of visitors to its theme parks and resorts, where traffic already was slowing. Theme parks have been a breadwinner for Disney, producing 35% of its operating income.
The greatest effect has been felt at Walt Disney World in Orlando, whose four theme parks and 18 resorts largely draw air travelers from out of state and abroad. Disneyland, in contrast, caters more to in-state customers.
“You couldn’t find [an entertainment] company more adversely affected by the events of Sept. 11 than Disney,” said Chris Dixon, an analyst with UBS Warburg.
However, Dixon and other analysts think most of Disney’s problems are short-term.
Disney declined to comment on analysts’ earnings estimates.
But company executives have said that attendance is recovering at the company’s theme parks. And they predict a further boost from computer animation feature “Monsters, Inc.” coming next month from Disney and Pixar Animation Studios and the DVD release of “Snow White and the Seven Dwarfs.”
“A turnaround at Disney is a matter of when, not if,” Disney President Bob Iger said recently.
Many other media companies have been squeezed by the costs of news coverage and a further slowdown in advertising spending. And unlike some of its peers, such as Viacom Inc., Disney still is expected to post a profit for the quarter.
But Disney’s fourth-quarter earnings before interest, taxes, depreciation and amortization may decline by 16% to $869 million, compared with the same period a year ago. Meanwhile, rival AOL Time Warner Inc. posted a 20% gain in EBITDA and Viacom had a 7% drop during the same period, according to Prudential Securities analyst Katherine Styponias.
Disney’s stock fell 31 cents on Friday to close at $18.71 on the New York Stock Exchange. Its shares have fallen more sharply than those of its peers since the Sept. 11 attacks.
Styponias predicts Disney’s theme parks and resorts will suffer more next year than they did during the 1991 Persian Gulf War, when attendance dropped 15%. The other engine of Disney’s business--broadcasting and cable--also has taken a beating in the last seven weeks.
The cost of continuous news coverage and commercial-free broadcasts combined with a reluctance by advertisers to spend money in a deteriorating economy will cut operating income in the company’s media networks division in the fourth quarter, analysts said.
All media companies have been affected, but the timing was especially bad for Disney’s ABC network, which has seen a slide in ratings in the last year and a half.
On the plus side, most analysts note Disney’s strong balance sheet and say the company has several growth areas, including DVD sales and overseas theme park growth.
Disney also could benefit from its $5.2-billion acquisition of Fox Family World Wide, which it will rename ABC Family and use as a secondary outlet for its programming.
