Analysts on Disney’s Weak Quarterly Report: Nobody Panic

Analysts, facing jitters after a rare Disney earnings miss, turn to an old adage: Timing is everything

Last Updated: May 11, 2016 @ 9:12 AM

Disney’s latest results were messy, but the company itself is no slob, Wall Street analysts said Wednesday after the entertainment giant reported a rare earnings miss.

In the first three months of the year, stellar business at Disney’s movie studio, helped by blockbusters like “Zootopia,” failed to offset a challenging period for its key television division and its consumer products like toys and other merchandise.

But many analysts noted that much of the trouble stemmed from awkward timing issues.

“Basically, we see no signs that the businesses are operating poorly, or are facing new or heightened threats,” Todd Juenger of Bernstein said in a note.

Still, Disney shares fell 4.8 percent to $101.84 in trading at about 11:10 a.m. E.T. The stock, which had been recovering briskly from a February low, is now down about 7 percent from a year earlier.

MoffettNathanson of Michael Nathanson said the short-term reaction the results is likely to be selling, but he said long-term investors might ignore the distraction of some moving parts that hurt the latest period and focus instead on a company that will benefit from continued strength in its film, parks consumer products.

Complicating the latest period were calendar issues that worked against the bottom line. A year earlier, Disney’s fiscal second quarter ran from Dec. 28 through March 28; this year, it comprised Jan. 3 through April 2.

That resulted in fewer college bowl games on ESPN, which hurt advertising revenue from the company’s powerhouse cable network. And its parks and resorts suffered because New Year’s Day holiday travel was missing in the latest period versus the one a year earlier.

And consumer products was dragged down by timing of fees, again because of differences in the calendar. At the end of the year, Disney gets payments related to guaranteed minimums for its consumer producsts. The start date of the last year’s second quarter meant the company booked all those payments, but the start date this year meant they were missing, setting up a tough comparison, according to FBR analyst Barton Crockett.

Disney does less to steer Street estimates than any other media conglomerate, yet its business is in some ways lumpier,” Crockett said. “If the fundamental story is intact, it should not really matter if quarterly earnings miss…which is what we see here.”