Walt Disney Earnings Preview: Fiscal Third Quarter 2009

Walt Disney [[DIS]] is scheduled to report their fiscal third quarter 2009 results after the market closes on Thursday, July 30. Based on our analysis, we at EarningsPreviews.com are expecting DIS to report disappointing results that fail to meet Wall Street’s consensus expectations.

 

Analyst Expectations

We are forecasting revenues of $8.74 billion and EPS of $.48. This would represent a 5% decline in revenues from last year’s $9.24 billion in the same period. The current analyst consensus estimates calls for revenues of $8.82 billion and EPS of $.50.

 

The last three quarters have been particularly difficult for Disney with the weak economy weighing on their results. While last quarter’s 7% decline was slightly better than the 8% decline in the prior quarter we expect the same cyclical themes this quarter. The decline in consumer spending has significantly impacted their theme park segment, while a weak advertising environment has impacted their media segment.

 

Disney shares have rallied recently as investors anticipate a turn in the economy. However, the stock is already priced for a recovery and any hiccups along the way could send the stock falling once again.

 

Share Performance

Since the beginning of the year, Disney’s shares have increased nearly 16%. In 2008, DIS shares fell 30% and basically performed inline with the 34% decline in the Dow Jones industrial average.

 

Valuation

Shares are now trading at 14x consensus 2010 EPS estimates. This is a premium to the relative valuations of their peer group. Disney shares have rallied recently along with all the other consumer cyclical stocks. However, we expect that the next couple of quarters may be more difficult than investors are expecting.

 

Recommendation: Sell with a $23 price target.

 

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