Disney Earnings Preview: Last Slow Quarter Before Growth Accelerates

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Disney (DIS) reports after the close on Monday. Due to timing issues and a tough comparison in home video, the quarter is expected to show a year-over-year decline in EPS and EBITDA. However, DIS is still poised for strong growth in its FY06 ending this coming September. I believe the back-end loaded year is well understood by investors but it does raise the stakes the in the remaining quarters which always is a yellow flag. As long as guidance for 2006 is maintained and the company stands by its “average of double digit growth through 2008” forecast, I think DIS shares are attractive and the best bet among large cap, diversified media stocks. Entering calendar 2006, DIS has all its major businesses moving in a positive direction at the same time and there is reason to believe that these trends are sustainable. I am long DIS across the enitre Northlake client base and in my personal accounts with all purchases made in the range of $24 to $26, including some as recently as late December.
For the December quarter, which is 1Q06 for DIS, the consensus EPS estimate is 30 cents vs. 34 cents a year ago. Revenue is forecast at $8.78 billion. For the March quarter, EPS are currently forecast to be flat at 31 cents vs. 32 cents a year ago. FY06 consensus EPS calls for $1.41 vs, $1.32 a year ago, representing a gain of 7%. Growth is expected to accelerate in FY06 with EPS rising to $1.63, up 15% against the current FY06 consensus….

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E.W. Scripps: Best Growth In Traditional Media

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E.W. Scripps (SSP) shares are responding very favorably to the company’s 4Q05 earnings report. I think three factors are at work. First, EPS came in above expectations at 54 cents vs. consensus of 49 cents. Second, the company announced that it is considering strategic alternatives for its home shopping business, Shop At Home. Third, Shopzilla continues to performing exceedingly well. When I consider these facts along with the company’s 1Q06 guidance and general commentary, I think that the underlying value in the shares was boosted by a couple of dollars to the mid $50s. This doesn’t provide a lot of upside vs. the current stock price but it is good news.
EPS strength in 4Q05 came from good results at the Cable Networks and Shopzilla. Both were above expectations. The surprise at Cable Networks appears to be cost related as revenue growth of 21% was in line with expectations. Shopzilla performed very well across the board….

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Comcast: Not Good Enough But I’d Hold On

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Comcast (CMCSA/K) reported 4Q05 earnings that were pretty much inline across all metrics. Revenue exactly hit estimates, EBITDA might be considered light but that is certainly not the case if hurricane losses of $48 million due to the loss of 20,000 subscribers are considered. Subscriber additions were on target with basic subs growing 40,000 (60,00 ex-hurricane losses), data subs growing slightly above expectations and digital TV subs growing as expected. ARPUs were stable to higher across the board as expected.
Despite a generally inline report, CMCSA shares will trade lower due to confusing 2006 EBITDA guidance that in the headline EBITDA number is probably considered light. CMCSA project revenue growth of 9-10% in 2006, as expected. However, EBITDA growth of 10-11% is below expectations by 100-200 basis points. Management explained at length that the broad rollout of VOIP and investments in content assets would each cost 100 basis points in growth next year. A major new product push like VOIP brings forward customer acquisition costs thus negating year one cash flow from the new subscribers. If you buy that argument and assume analysts had not factored the lag into 2006 estimates then guidance is fine. Based on numerous questions on the call, this is clearly the issue facing the shares today. The questions also suggest that analysts had not considered these factors….

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Time Warner: The Street Will Like It, But Not Me

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Time Warner (TWX) reported 4Q05 earnings pretty much inline with expectations with revenue and EBITDA both coming in very close to analyst estimates. As usual, the mix at the segment level was a little different than expected. The company also provided EBITDA growth guidance for 2006. EBITDA is expected to grow in the upper single digits, inline with current analyst expectations, but the 2005 base is being reset lower so I am not quite sure if the apple-to-apples comparison is OK. I think it is. At the segment level, management provided limited commentary on 2006.
TWX shares are trading up over 2% which you might find a little surprising relative to the comments I am about to make on the segments. I think the rise is being fueled by the announcement that the company will dramatically up the pace of its share repurchase program starting this quarter. One year ago, the Board authorized a $12.5 billion repurchase program, of which $3 billion was purchased by the end of 2006. In my opinion, given the lousy performance of the stock, the discount to my target value of $22, and sustainable free cash flow of over $3 billion annually, the pace of buying has been too slow. CEO Dick Parsons announced on the call that the company would double the pace of buying beginning immediately….

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E.W. Scripps Earnings Preview

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E.W. Scripps (SSP) reports before the open on Thursday. The company preannounced a shortfall late last year related primarily to continuing disappointing results at the Shop At Home division. Therefore, there should be little surprise in the headline EPS number which is projected at 49 cents for 4Q05. That would bring the year in at $1.85. Revenues for the quarter are projected at $698 million.
Looking ahead, current 1Q06 consensus calls for revenue and EPS of $687 million and 44 cents, respectively. For all of 2006, EPS are projected at $2.13, up 15%, on revenues of $2.88 billion.
I have always admired SSP and was long the stock for along time. Over the past year though, I’ve become a little frustrated with the shortfalls at Shop At Home and investment spending that is holding back earnings growth. However, what really concerns me is a potential slowdown in the growth rate of the company’s Cable Networks. SSP has created immense value in this business, which now represents over half of the EBITDA, and arguably 75% or more of the equity value. Management deserves great credit for what has been mostly internal growth and also for making additional investments to sustain the growth….

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Comcast Earnings Preview

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Comcast (CMCSA/K) reports before the open on Thursday. So far in 2006, CMCSA has risen 7.5%. I think this sets up a big move in the stock off the earnings report as investors will either be disappointed and willing to lock in this year’s gains or they will be happy and build on the gains. I am in the bull camp.
Expectations for the quarter call for revenue of $5.72 billion and EBITDA of $2.19 billion. All but about $250 million in revenue and $50 million in EBITDA will come form the company’s cable operations with content providing the balance. While the NHL contract could provide negative volatility in the overall results, it will be growth rtes and metrics within cable that determine how the Street reacts to the results…..

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