UBS On Disney Results: Messy Q2 Miss, Year On Track With Core Trends Still Strong

UBS said though Walt Disney Co DIS reported a "messy" second quarter miss, the company's core trends are still strong. Issues at Consumer Products business drove a $0.04 EPS miss for the company. Despite delivering double-digit growth in adjusted EPS for the 11th consecutive quarter, the second quarter marked the first time Disney had failed to meet analysts' expectations in over two years. "Consumer products disappointed at +3% Y/Y licensed revenue, but core earned growth were still quite strong at 18% (Star Wars outpacing Frozen comps). Minimum guarantee bookings shifted into F1Q this year, leaving a difficult comp for 2Q (one that the Street did not pick up on)," Mitchelson noted. The subscriber losses had only a 1 percent impact in the second quarter versus 2 percent in the first quarter. "We have often noted that Nielsen data for network subscriber levels (-3.5% Y/Y) have been overstating ESPN sub declines, and these 10-Q disclosures suggest that not only are we accurate, but ESPN's sub losses also have improved slightly recently," analyst Doug Mitchelson wrote in a note. Though cable network advertising was disappointing at +3 percent ex-unusuals, the analyst said it is pacing up 5 percent in the third quarter. In addition, hotel bookings are pacing up a very strong 5 percent for the third quarter and Mitchelson's analysis shows 41 percent of the days in the third quarter are at the new peak pricing for single-day tickets versus none of the days at the new value price level, favorable for Y/Y spending per guest. The analyst's FY16 and FY17 EPS estimates remain at $5.91 (Street $5.85) and $6.31 (Street $6.25), respectively. Mitchelson has a Buy rating and $116 price target on the stock, which was currently down 4.47 percent to $101.83.