Disney loses magic touch on Wall St
Thursday 05 March 1998
Walt Disney Co will earn less than expected in the fiscal second quarter because of lacklustre films, the effect of El Nino storms on theme-park attendance and poor ratings at its ABC television network, analysts said. The pessimism helped depress sentiment on the New York stock exchange.
By late afternoon, Disney shares had fallen 3.8 per cent, in trading of 2.1 million, more than the three-month daily average of 1.4 million. At one point the stock accounted for 17.4 points of a 68.75 point decline in the Dow Jones Industrial Average to 8516.08, although the Dow later regained some ground to close 45.6 points down at 8,539.24.
Before the stock market opened, several analysts lowered earnings estimates for Disney's second quarter. Company officials were not immediately available to comment. "In terms of the recent prices we thought it [Disney's stock] was extreme and we have suggested to people on a trading basis to lighten up," Howard Vogel at Cowen & Co said, adding he was likely to cut his second-quarter estimate.
As several of its films struggle at the box office, analysts said Disney's ABC television network was facing stiff competition and fewer people were visiting theme parks because of bad weather.
None of Disney's films was expected to perform that well in the quarter, and most analysts do not expect ABC to show signs of a turnaround until next year. Disney's main film offerings in the second quarter - Kundun and Deep Rising - had disappointing results, while the upcoming Krippendorf's Tribe, with Richard Dreyfuss, is not expected to do well.
Kundun, a Martin Scorsese film about the Dalai Lama, generated just $5.22m (pounds 3.16m) in revenue, while Deep Rising, a disaster movie centred on a cruise ship, amassed $10.8m.
Analysts said the New York market might have been ripe for some weakness after closing at record highs for five straight sessions. Disney was weighing heavily on stocks, they said. They said there was fear that Disney might be a prelude to bad earnings news from other blue-chip firms.
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