By Alex Dobuzinskis
LOS ANGELES, Feb 8 (Reuters) - A shrinking box office and weak attendance at theme parks may weigh on quarterly results from Walt Disney Co, though analysts say investors can expect a revenue boost in 2010 when its Marvel acquisition begins to pay off.
Disney, which unveils earnings on Tuesday for its first fiscal quarter ended Jan. 2, may end up disappointing investors just a week after media rivals News Corp and Time Warner Inc beat earnings expectations, underscoring a potential rebound in the embattled advertising sector .
Disney reaches into many sectors of the U.S. entertainment and leisure economy, generating about half its revenue from its studio and theme park businesses, and the recession is expected to keep hurting theme parks in particular.
The Mouse House is thus expected to benefit less from the upswing in advertising than its peers.
'The studio came in a lot worse than the Street had it,' said Jason Helfstein at Oppenheimer & Co Inc. 'They have an asset mix we like long-term, but we think you're going to get to buy the stock cheaper after earnings.'
Looking forward to the rest of fiscal 2010, analysts expect Disney to reap big revenue from toy sales and other consumer products tied to highly anticipated, Paramount-distributed 'Iron Man 2,' following last year's acquisition of that character when it bought Marvel Entertainment. Paramount Pictures is a unit of Viacom Inc.
On average, analysts forecast Disney will report a profit of 39 cents per share in quarterly earnings on Tuesday, according to Thomson Reuters I/B/E/S, down from 45 cents per share a year before.
SmartEstimates from Thomson Reuters StarMine, which lends more weight to recent estimates from top-ranking analysts, puts the average expectation at 38 cents, or about 1.8 percent below Wall Street's mean forecast.
Helfstein expects Disney will report earnings per share of 34 cents, while Soleil Securities forecasts EPS of 37 cents.
Disney's shares have climbed nearly 80 percent since their 2009 trough in March, as shares in media companies headed north in anticipation of a rebound in the cyclical advertising industry.
PARKS LAG RECESSION
But Soleil analyst Alan Gould said Disney's movie studio will drag on the company; it had movie launches last quarter that failed to catch on with consumers, including the comedy 'Old Dogs,' and had 19 percent lower U.S. and Canada box office revenue than in the year-earlier period.
In overall revenue, Soleil estimates studio entertainment generated $1.85 billion for Disney in its first quarter, compared with $1.95 billion in the same period a year before.
Some analysts say Disney needs to resuscitate a once-mighty movie studio arm. Disney made a number of management shake-ups in recent months, as the longtime head of the company's film studio, Dick Cook, was replaced by Rich Ross, who grew the U.S. Disney Channel into the top-rated kids cable network.
Disney also had Tom Staggs, its chief financial officer, and Jay Rasulo, its parks chief, switch jobs in November.
'This is a clean-up quarter -- new CFO, new head of parks, new head of studio -- you set the bar low; you clean up where you have to clean up,' Helfstein said.
One of the strongest performers for Disney continues to be its sports cable television operation ESPN, which had a solid quarter in ratings.
'That may be slightly offset by the fact that sports (channel) advertising has not come back quite as well as some other advertising,' Gould said. Auto companies, which are heavy advertisers for TV sports programming, are still recovering, and their advertising levels reflect it, he said.
Oppenheimer said it expects Disney's DVD revenues, which have been sliding along with home video revenue for the rest of the industry, will be up 6 percent, but only because Disney released one more movie title than in the year-earlier period.
Gould also said theme parks, which depend on consumers' employment and ability to travel, will show weak results. Other analysts say Disney has been ramping up marketing and discounting tickets to try to drive attendance, which hurt revenue.
He noted that the last time the economy took a downturn, following the attacks of Sept. 11, 2001, it took until 2005 for margins to bounce back in Disney's theme park business.
And he said a similar lag in recovery occurred during the recession of the early 1990s.
'Theme parks tend to lag a recovery, so there'll still be some challenges in the theme park business,' Gould said.
(Additional reporting by Sue Zeidler, editing by Edwin Chan and Gerald E. McCormick) Keywords: DISNEY/ (alex.dobuzinskis@thomsonreuters.com; 1 213-955-6781) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
LOS ANGELES, Feb 8 (Reuters) - A shrinking box office and weak attendance at theme parks may weigh on quarterly results from Walt Disney Co, though analysts say investors can expect a revenue boost in 2010 when its Marvel acquisition begins to pay off.
Disney, which unveils earnings on Tuesday for its first fiscal quarter ended Jan. 2, may end up disappointing investors just a week after media rivals News Corp and Time Warner Inc beat earnings expectations, underscoring a potential rebound in the embattled advertising sector .
Disney reaches into many sectors of the U.S. entertainment and leisure economy, generating about half its revenue from its studio and theme park businesses, and the recession is expected to keep hurting theme parks in particular.
The Mouse House is thus expected to benefit less from the upswing in advertising than its peers.
'The studio came in a lot worse than the Street had it,' said Jason Helfstein at Oppenheimer & Co Inc. 'They have an asset mix we like long-term, but we think you're going to get to buy the stock cheaper after earnings.'
Looking forward to the rest of fiscal 2010, analysts expect Disney to reap big revenue from toy sales and other consumer products tied to highly anticipated, Paramount-distributed 'Iron Man 2,' following last year's acquisition of that character when it bought Marvel Entertainment. Paramount Pictures is a unit of Viacom Inc.
On average, analysts forecast Disney will report a profit of 39 cents per share in quarterly earnings on Tuesday, according to Thomson Reuters I/B/E/S, down from 45 cents per share a year before.
SmartEstimates from Thomson Reuters StarMine, which lends more weight to recent estimates from top-ranking analysts, puts the average expectation at 38 cents, or about 1.8 percent below Wall Street's mean forecast.
Helfstein expects Disney will report earnings per share of 34 cents, while Soleil Securities forecasts EPS of 37 cents.
Disney's shares have climbed nearly 80 percent since their 2009 trough in March, as shares in media companies headed north in anticipation of a rebound in the cyclical advertising industry.
PARKS LAG RECESSION
But Soleil analyst Alan Gould said Disney's movie studio will drag on the company; it had movie launches last quarter that failed to catch on with consumers, including the comedy 'Old Dogs,' and had 19 percent lower U.S. and Canada box office revenue than in the year-earlier period.
In overall revenue, Soleil estimates studio entertainment generated $1.85 billion for Disney in its first quarter, compared with $1.95 billion in the same period a year before.
Some analysts say Disney needs to resuscitate a once-mighty movie studio arm. Disney made a number of management shake-ups in recent months, as the longtime head of the company's film studio, Dick Cook, was replaced by Rich Ross, who grew the U.S. Disney Channel into the top-rated kids cable network.
Disney also had Tom Staggs, its chief financial officer, and Jay Rasulo, its parks chief, switch jobs in November.
'This is a clean-up quarter -- new CFO, new head of parks, new head of studio -- you set the bar low; you clean up where you have to clean up,' Helfstein said.
One of the strongest performers for Disney continues to be its sports cable television operation ESPN, which had a solid quarter in ratings.
'That may be slightly offset by the fact that sports (channel) advertising has not come back quite as well as some other advertising,' Gould said. Auto companies, which are heavy advertisers for TV sports programming, are still recovering, and their advertising levels reflect it, he said.
Oppenheimer said it expects Disney's DVD revenues, which have been sliding along with home video revenue for the rest of the industry, will be up 6 percent, but only because Disney released one more movie title than in the year-earlier period.
Gould also said theme parks, which depend on consumers' employment and ability to travel, will show weak results. Other analysts say Disney has been ramping up marketing and discounting tickets to try to drive attendance, which hurt revenue.
He noted that the last time the economy took a downturn, following the attacks of Sept. 11, 2001, it took until 2005 for margins to bounce back in Disney's theme park business.
And he said a similar lag in recovery occurred during the recession of the early 1990s.
'Theme parks tend to lag a recovery, so there'll still be some challenges in the theme park business,' Gould said.
(Additional reporting by Sue Zeidler, editing by Edwin Chan and Gerald E. McCormick) Keywords: DISNEY/ (alex.dobuzinskis@thomsonreuters.com; 1 213-955-6781) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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