Higher profit seen at Disney in 2012

CHICAGO (MarketWatch) ' Walt Disney Co. is expected to post higher profit for the quarter ended Dec. 31, though difficult comparisons with very strong results at ESPN and in home video in the year-earlier period could have an impact.

Disney DIS 'is expected to post a fiscal first-quarter profit of 75 cents a share, excluding stock-option payments, on revenue of $11.19 billion, according to a consensus poll of analysts by Thomson Reuters.

In the same period a year earlier, the company earned 68 cents a share on revenue of $10.7 billion.

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Jeffrey Thomson of Hilliard Lyons said late last year that Disney's December quarter 'is likely to produce the smallest year-over-year increase' of fiscal 2012, 'due in part to a tough comparison to the year-ago quarter ' a period that included considerable growth at ESPN and benefits of robust DVD sales of 'Toy Story 3.''

Across the media and entertainment industries, there is optimism about the advertising market, especially in television, which has held most of its appeal for advertisers as one of the few remaining ways to reach mass audiences.

Ad sales and rates are expected to once again be strong at ESPN, where! NBA gam es, college basketball and various shows around the NFL have led to solid ratings gains, but Disney Chief Executive Bob Iger warned in November that comparisons with the fiscal fourth quarter of 2010 would be difficult.

At ABC, the network's situation comedies have received solid ratings, though it ranks third among the Big Four networks among adults 18 to 49 years old ' the group most desired by advertisers because of its apparent willingness to switch brands.

Analysts will look forward to getting more insights from Iger on the online-video model and its potential effect on traditional TV. Comcast Corp. CMCSA 'and Disney unveiled a 10-year deal last month that will make Disney shows available on a wide variety of Comcast platforms, including regular TV, video-on-demand, phones and tablets. Under the deal, Comcast customers can watch Disney shows online that can't otherwise be viewed on the Web.

Disney executives will probably also be asked what last month's Italian cruise-ship tragedy could mean for its own cruise ships. The Carnival Cruise-owned Costa Concordia foundered off the coast of Italy, killing at least 16, and observers fear that the incident could be a concern to would-be passengers in the near term.

Disney recently launched its third ship, the Disney Dream, and some analysts speculated that a fourth could be launched in fiscal 2012.

Best Wall St. Stocks Today: AMR,NWA,DAL,UAUA

In all industries staying out of Chapter 11 is a badge of honor. The sole exception to that is the airline business where bankruptcy is embedded in the culture like ticks are on the hide of a deer.
One of the few large US airlines which stayed out of a significant financial mess over the last decade is AMR (NYSE: AMR), the parent of American Airlines. In the most perverse sort of way, a Chapter 11 filing four or five years ago might have spared AMR from its current perilous state.
One advantage that Northwest (NYSE: NWA), Delta (NYSE: DAL), and United (NASDAQ: UAUA) have in the present difficult economic environment is that they used their trips through the Chapter 11 process to tear away debt as well as employees which they deemed to be redundant. By several accounts, NWA has saved over $2 billion a year because it went through bankruptcy.
All of the large US airlines are at great financial risk now. Ditto for many of their overseas brethren like Alitalia. Fuel costs are up sharply and passenger revenue and revenue miles are likely to fall as the economy keeps people off commercial carriers The very rich can continue to operate their own fleets of private jets.
The present financial trouble does not strike each large US airline equally. Largely because of an advantage of Chapter 11, NWA has $6 billion in debt to its $3 billion in cash. At AMR, long-term debt totals $15.6 billion compared to its $4.6 billion in cash. Last year, AMR’s EBITDA was only about two times it interest expenses. By paying all of its bills, AMR has been placed at a great disadvantage.
AMR had very modest operating income of $965 million last year compared to its $22.9 billion in revenue. The market has figured out the problem. While shares in other national carriers are off about 50% in the last six months, AMR is off 60%. That is a significant negative premium, a vote saying AMR is in a different bucket than its competitors are.
Aloha Air, ATA, ! and SkyB us all went out of business in the last two weeks. Several carriers reported falling traffic for March. At AMR, domestic traffic fell 5.9% for the month.
At some point soon, the dropping revenue effect and rising expenses cross where interest payments matter.
That will be soon at AMR and it puts the company at great peril.
Douglas A. McIntyre