We have maintained our long-term Neutral recommendation on
The Walt Disney Company
) with a target price of $58.00, following the company's
first-quarter fiscal 2013 earnings. Moreover, shares of Disney
retain a Zacks Rank #3 (Hold).
Why the Reiteration?
Disney reported yet another healthy quarter as revenue gains
at the Parks and Resorts business and strong performance of the
Media Networks division continue to boost the company's
Disney's first-quarter fiscal 2013 earnings of 79 cents a
share surpassed the Zacks Consensus Estimate of 77 cents but
inched down 1.3% year over year. Total revenue increased 5% year
over year to $11,341 million and exceeded the Zacks Consensus
Estimate of $11,237 million.
Going forward, the company stated that, domestic resort
reservations and booking rates are witnessing healthy trends.
Further, with a strong slate of releases including
Iron Man 3
Oz: The Great and Powerful
Monsters Inc. 2
The Lone Ranger
, the company remains well positioned to drive revenue growth in
the coming quarters.
Moreover, Disney entered into several content distribution
agreements which strengthen its multichannel subscription model
by adding more platforms to deliver its content. The company
remains focused to generate increased income from affiliate deals
and retransmission renewals.
However, Disney's increased capital spending toward expanding
its Parks and Resorts business is likely to exert pressure on the
margins in the near term as evident from the company's recently
concluded quarter. Total segment operating income during the
quarter decreased 3% year over year to $2,380 million, whereas
total segment operating margin decreased approximately 170 basis
points to 21%. Further, decelerating advertising trends keep us
on the sidelines.
Other Stocks to Consider
Until any further upward revision in the rating of Disney,
other stocks in the media & entertainment universe worth
Time Warner Inc.
Digital Cinema Destinations Corp.
), all holding a Zacks Rank #2 (Buy).
CBS CORP (CBS): Free Stock Analysis Report
DIGITAL CINEMA (DCIN): Free Stock Analysis
DISNEY WALT (DIS): Free Stock Analysis Report
TIME WARNER INC (TWX): Free Stock Analysis
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