Disney's Top-Line Miss: 'The Force' Was Too Strong With Q1 Last Year

David Miller of Loop Capital stuck to his Buy rating on Walt Disney Co DIS despite mixed first-quarter results, which saw earnings topping Street view while weakness in ESPN dragged down sales below consensus estimate.

2016's Headwinds

Disney’s Media Networks’ revenue fell 1.6 percent to $6.23 billion, driven by lower advertising at ESPN due to three fewer 'New Year's Six' bowl games in the quarter. Miller said the media networks performance “not bad considering tough compare.”

However, theme parks’ revenues grew 6.4 percent to $4.56 billion, despite the closure of the Orlando complex for 2+ days in early October due to Hurricane Matthew.

“We note last year's FQ2 Park results saw revenues increase 4.5 percent, with EBIT up 10.2 percent, so the +2.0 percent data point is a huge positive in our view,” Miller wrote in a note.

Meanwhile, the last year’s tough Star Wars TFA comparisons weighed down on Studio results. The segment’s revenue fell 7.4 percent to $2.52 billion.

A New Hope

The company’s upcoming film slate offers some hope. The films include the "Beauty & the Beast" live action film (March 17), "Guardians of the Galaxy 2" (May 5), "Pirates of the Caribbean 5" (May 26), "Cars 3" (June 16) and "Star Wars Episode VIII" (December 15).

With Disney stating that fiscal year 2017 will be a "transition year" due to pension expenses and tough comps at both studio and consumer products, Miller sees the return of mid/high teens earnings growth only in F2018.

At last check, shares of Disney were up 0.91 percent to $109.99. Miller has a price target of $118.