Disney Reports After the Close (May 5th)

Walt Disney Co.'s (NYSE:DIS) theme parks may seem as crowded as ever with lines overflowing for their attractions. But behind the crowds are deep discounts that lured them there, possibly straining Disney's bottom line. Investors will be looking at the media giant's numbers Tuesday at 4:30 p.m. (EDT) when the Burbank, Calif.-based company announces its second-quarter earnings.

Analysts polled by Thomson Reuters expect profit to come in at 40 cents per share, but Mickey & Co. could fall short based on the toll of the heavy discounts on theme park tickets. Discounts aside, Disney didn't stay pat during these slow times; it cut  nearly 1,900 employees through voluntary buyouts and layoffs. Meanwhile, Disney is looking to capitalize on the affluence of China's growing 1 billion-plus population, by reportedly nearing a deal with the Hong Kong Special Administrative Region government to finance an expansion of Hong Kong Disneyland.

The theme park business has been seeing slow growth during the last several years as attendance has waned with park owners competing with a myriad of cheaper alternatives, such as movies, video rentals and video games. Our sister site Corporate Dealmaker points out that "Six Flags is (NYSE:SIX) restructuring to avoid bankruptcy, while the parent of Hard Rock Park in Myrtle Beach, S.C., and Ghost in the Sky amusement, which operates a theme park in North Carolina, have already filed." Anheuser-Busch InBev NV reportedly is also shopping its Busch Entertainment Corp., which operates 10 theme parks in the U.S.

Meanwhile, on the M&A front, Disney CEO Robert Iger is following through with his pledge to do more deals. Disney acquired a stake in growing video Web site Hulu.com on April 30, looking to leverage more exposure for its prime-time television shows such as "Desperate Housewives" and "Grey's Anatomy." Even before the Hulu deal, Disney also added niche Web sites such as Babayzone.com and Funschool.com from Canadian-based Kaboose Inc. for $18 million on April 1.

While the impact of Disney's recent acquisitions won't be felt immediately, the company will continue to tweak its formula in reaction to a recession that has shown no signs of softening. So, for now, seeing Mickey and friends on the cheap is still possible, but once the economy heats up look for those deep discounts to go away.

SOURCE: http://www.thedeal.com/dealscape/2009/05/walt_disney_co_earnings_previe....