7:30 PM
By Sue Zeidler
LOS ANGELES | Thu Nov 11, 2010 9:07pm EST
LOS ANGELES (Reuters) - Walt Disney Co (DIS.N) forecast rising ad sales, pricing and theme park attendance, sending its shares higher after it posted a rare quarterly earnings miss that contrasted sharply with strong performances by its peers in the media sector.
The entertainment conglomerate's stock climbed 2.1 percent after hours on the rosier outlook. The shares ended down 3 percent on Thursday after Disney inadvertently released its disappointing fourth quarter results before the market closed, spooking some investors. It is investigating the matter.
The company, nevertheless, sounded a positive note with analysts.
"The current trends in our business are encouraging. We're also optimistic about our creative pipeline. Thus, we believe we are well positioned to deliver strong results in 2011," said Disney Chief Financial Officer Jay Rasulo on a conference call with analysts.
Disney said ad sales in the current first quarter were pacing up double-digit percentages at both ESPN and TV stations, reflecting a stabilizing economy. It also said U.S. hotel reservations were up 5 percent in the current quarter from a year-ago.
But Wall Street had expected better fourth quarter numbers from a company that has exceeded earnings expectations in each of the past six quarters. Disney's shares have been up about 15 percent this year amid perceptions an advertising recovery was taking hold, outperforming the share performances of both Time Warner Inc (TWX.N) and News Corp, which recently posted strong profits on the advertising rebound.
MESSY QUARTER
"Generally, the forward trends look good and they're entering into the sweet spot of the content and consumer product cycle. Advertising trends also look strong," said David Bank, analyst with RBC Capital Markets, noting the fourth quarter was "messy" due to a calendar shift, writedowns and other items.
Weak fiscal fourth-quarter revenue at Disney's media networks division -- its largest -- offset a boost from smash "Toy Story 3" in its studio unit and robust advertising sales.
"The revenue bright spot that beat our estimate was the studios, mostly on the strength of 'Toy Story 3'" said David Joyce, analyst with Miller Tabak.
The lower revenue at its media networks division was the result of there being one less week in the quarter than last year, and a writedown for programing. Also, sports cable channel ESPN had already recognized a significant amount of revenue from affiliates in the fiscal third quarter of this year after hitting a targeted number of key sporting events, as opposed to in the fourth quarter a year ago. That led to a lower revenue comparison.
Analysts said ESPN recognized $354 million less deferred revenue than the period a year ago, noting the amount was equal to earnings of about 9 cents per share.
Another bright spot was in Disney's broadcasting division, which saw an increase in operating income driven by decreased programing and production costs at ABC and higher advertising revenues and ratings.
Overall, Disney's fourth-quarter net income fell to $835 million, or 43 cents per share, compared with $895 million, or 47 cents per share, a year earlier.
Excluding items, Disney reported earnings of 45 cents a share. Analysts on average had expected earnings of 46 cents a share, according to ThomsonReuters I/B/E/S.
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