A Weak Q1 Could Be Ahead For Disney, Pivotal Downgrades Stock

Walt Disney Co DIS reported Q4 results softer than expected. The company’s performance in Q1 is likely to be weak, Pivotal’s Brian Wieser said in a report. He downgraded the rating on the company from Buy to Hold, while reducing the price target from $108 to $102.

Disney reported its Q4 total revenue down 3 percent, versus consensus expectations of flat. Adjusted EPS came in at $1.10, short of the estimate of $1.16.

“Results were primarily down because of Disney’s fiscal calendar, which led to one fewer week vs. the year-ago period. However, there was also more underlying softness than we expected in cable advertising, consumer products, the parks and the studio,” Wieser pointed out.

Weakness Ahead

• Media Networks: Management indicates a downtrend in Cable advertising in the current quarter, impacted by fewer college football games. The operating income margin contraction at Cable potentially reflects a longer-term trend, Wieser noted.
• Parks: Management noted that a hurricane would negatively impact the segment’s operating income by $40 million in the December quarter. “Parks will be impacted further by the calendar shifting $20mm into the March quarter,” the analyst added.
• Studio division: The October quarter witnessed a reversal of the current trends and the segment posted weak revenue growth and margin contraction.
• Consumer Products segment: Management cautioned about tougher comps for the December quarter, and projected a 20 percent year-over-year decline in operating income.