Walt Disney (DIS) PT, Estimates at Jefferies on Slowing Growth

Jefferies analyst, John Janedis, reiterated his Hold rating on Disney (NYSE: DIS) as he expects parks revenue growth and margin expansion to moderate with occupancy approaching peak levels and ticket price increases likely moderating. The analyst is and has been below the street EPS consensus but slightly reduced estimates by less than 1% while leaving his Hold rating unchanged. The price target was reduced to $92 from $112.

With domestic occupancy levels increasing from 82% in F11 to 88% in F16E, we think the majority of future revenue growth from the hotels will have to come from price going forward. The increase in occupancy (even with the addition of Art of Animation) translated to an estimated incremental 1.37M occupied rooms in F16E compared to F11, at an average room rate (over the 5-yr period) of $282/night. domestic park margins have increased from 12.8% in F11 to an expected 21.1% in F16E. Going forward we assume annual margin expansion of ~60bps/yr in F16-20E translating to a slowing of EBIT growth to 9% over the same period.

Despite slower margin growth, the analyst notes that promotions are moderating. Given the increased occupancy levels, he expects DIS to be less promotional at WDW and DL. Promotions at WDW for this spring are coming in 5% below a year ago.

Slightly reducing F17 & F18 EPS for DIS to $6.00 and $6.63 vs. prior $6.01/ $6.65 and consensus of $6.22 and $6.81, respectively. Our F16 EPS is unch at $5.57 (FC: $5.65).

For an analyst ratings summary and ratings history on Walt Disney click here. For more ratings news on Walt Disney click here.

Shares of Walt Disney closed at $95.82 yesterday.

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