Disney (DIS) Looking to Bring Back the Magic with Q4 Results

Walt Disney (NYSE: DIS) shares are trading lower ahead of the company’s fourth quarter earnings report, expected out after the market closes today, November 12, 2009. The shares are down 0.72%, or $0.21, to $29.08.

DIS is expected to report EPS of $0.41 on revenue of $9.27 billion. For Q309, Disney beat analyst EPS estimates by reporting $0.52, but fell short on revs of $8.6 billion. One year ago, in Q408, amid the financial meltdown, Disney missed EPS estimates by 6 cents, but reported $9.45 billion in revs, better than estimates.

Data from Bloomberg shows 16 analysts with a Buy rating on Disney, 12 with a Hold rating, and 4 with a Sell. The Street consensus price target is $31.09. The Street high target is $36, and the low is $20.

With shares of Disney closing at $27.46 on September 30, 2009, the stock has risen about 17.7% over their Q4. On a year-to-date basis, shares are up 28%.

RECENT ANALYST COMMENTS:
Maintaining a Buy on the stock, Deutsche Bank recently put out a Q409 preview on Disney. They believe Disney had a strong Q4, driven by films, but struggled with weaker home videos. The firm expects Disney to have a $50 million write-down for the film “A Christmas Carol”. Further, Deutsche sees weaker park revenues, despite an extra week in the quarter, and estimates that EBIT fell 28% over the quarter. Deutsche thinks that Disney faces less competition than any other company that they cover.

Wells Fargo sees Disney reporting revs of $9.79 billion, up 3.6% from a year ago, and EPS of $0.39, reflecting an extra week in the quarter. Wells believes that, “investors will focus on management’s commentary on 1) the Parks – bookings for Q110 per capita spend and promotions, 2) the state of the overall ad market, specifically if stabilization seen in Q2, improved in Q3, and 3) ratings and programming costs at ABC.”

ANALYST COVERAGE OVER LAST QUARTER:
Sanford C. Bernstein upgraded Disney from Market Perform to Outperform in July, citing attractive risks-reward.

Also in July, Piper Jaffray started coverage on Disney with a Neutral, saying ESPN’s gains were offset by ABC’s challenges. The firm also said that parks and consumer products were likely to underperform until consumer spending ramped up.

August saw Janney Montgomery Scott initiate coverage on Disney with a Buy. The firms saw opportunities at DIS from emerging digital initiatives, DVR advertising, and changes in distribution windows that will negate technology threats largely discounted into the stock. The firm assigned a $30 price target to DIS.

At the end of September (end of Q409), Soleil Securities maintained their 'Hold' on Disney and set a price target of $25. Soleil saw weaker comps and park attendance, noting the “Buy 4, Get 3 Free” promotion. The firm also saw some integration and amortization issues with Marvel and weakening DVD sales.

RECENT NEWS BITS:
On June 30, Disney and the Government of Hong Kong reached an agreement to expand the entertainment giant’s footprint in China. The deal had Disney injecting about $795 million into the joint venture.

In late August, the Disney-ABC Television Group (NYSE: DIS), Hearst Corporation and NBC Universal today announced an agreement for A&E Television Networks to acquire Lifetime Entertainment Services. The agreement consolidated three of the nation’s top cable networks under a single manager, but preserved the identities of each company.

Also in August, Disney acquired Marvel Entertainment in a deal valued at about $4 billion. The deal put the powers of Iron Man, Spider-Man, X-Men, Captain America, and others into Disney’s hands.

Walt Disney is expected to release their earnings for Q409 on Thursday, November 12, 2009, at 4:00pm (EST). Stay tuned to Streetinsider.com's Earnings section to see our analysis of the highly-anticipated quarterly results within seconds of their release.

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