Disney Shares Soar Despite 'Weak' Quarter


Shares of Walt Disney Co. stock surged nearly 6% ($2.07 per share) in early trading Friday, despite what was initially thought to be a weak fiscal fourth quarter and news that the company is investigating the premature release of its earnings results on Thursday. The company's stock closed Nov. 12 at $37.75 per share, up 5.1% ($1.82 per share).

Disney shares were manhandled in late trading last Thursday when its fiscal fourth quarter results hit the wires between 15 and 30 minutes early. The stock dipped more than 4% ($1.50 each) to $35.49 as Thursday's closing bell neared before rebounding slightly to finish the day at $35.93 each, down 2.9% or $1.03 per share. Adding to the pain was that Disney's fiscal fourth quarter performance appeared to be poor -- revenue and segment operating income were down by 1% and 7% respectively -- which forced some shareholders to the exits.

On its conference call with analysts after market close on Thursday, Disney said it was investigating the glitch.

On the call Disney executives also explained that the quarter was complicated by several outside factors -- the quarter has one less week than the same period last year, a one-time programming write-off at A&E Television Networks and lower deferred revenue at ESPN due to timing issues.

"I agree it was a very messy quarter," Disney chief financial officer Jay Rasulo said on the conference call.

Once the dust cleared, analysts discovered that the quarter was much better than it appeared at first blush.

In an e-mail, Miller Tabak analyst David Joyce (who raised his 12-month price target on Disney to $43 per share from $40 on Friday) said that the confusion surrounding the early release of earnings led to Thursday's declines.

"The -3.5% drop when the earnings release was inadvertently put on their website 30 minutes before the market closed was a confusing mess, because a lot of analysts hadn't fully figured into their estimates that this 4Q10 had one less week than last years, so optically, the results appeared to be down, and worse than expected," Joyce wrote in an e-mail. "But management explained on their call that the truly comparable advertising and parks attendance results were quite strong, and are continuing into the current quarter, 1Q11."

Disney shares were up nearly 6% ($2.07 each) in early trading Friday to $38 per share. The stock closed at $37.75 per share on Nov. 12, up 5.1%, or $1.82 each.