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Disney Dances Past Second Quarter Estimates


Mickey and crew beat consensus by seven cents per share.

Somewhere right now, Mickey Mouse is undoubtedly high-fiving Goofy thanks to Disney's (DIS) better-than-expected second quarter results, which were released after the closing bell on Tuesday. According to Bloomberg:

Net income rose 22 percent to $1.13 billion, or 58 cents a share. Sales gained 9.5 percent to $8.71 billion. Profit beat the 51-cent average of 20 analysts' estimates compiled by Bloomberg.

In short, this is good news for Disney and its shareholders because, frankly, so many in the investment community wondered how consumer spending or lack thereof might impact visits to Disney theme parks. Yet the parks and resorts revenue line item was up a respectable 11%. Plus, domestic attendance was reportedly up 5%.

Some had also speculated that the sluggish economy might have an adverse impact on merchandise sales, but consumer product revenues were up 10%. To be clear, Disney isn't out of the woods by any stretch. However, its numbers do seem to demonstrate a tinge of resiliency and suggest that it may indeed have the wherewithal to weather the lingering economic storm.

Another positive is that Disney was able to turn in a solid quarter in spite of the writer's strike earlier this year, which likely hurt advertising revenues at its ABC network.

The sell-side is probably going to be pretty happy with these results, and it should come as no surprise if we see some positive research, or even some upgrades, in the days and weeks ahead. Plus, with the stock now trading not too far off it's 52-week high, there's a chance that portfolio managers could add Disney to their holdings for window dressing purposes near the end of the quarter. This could give the shares a boost as well.

The flip side: Rising oil prices and food costs could potentially take a bigger toll on consumer spending. This in turn could have an adverse impact on the theme parks, merchandise and movies. In other words, it would be incorrect to assume that Mickey is entirely immune to a slumping economy.

Another thing to keep in mind is that the weak dollar might have been a reason why its parks and resorts, which constitute about 31% or so of its quarterly revenue, fared so well. In other words, there's a chance that some folks stayed local because traveling abroad has become so expensive. Plus, some foreign visitors probably took advantage of the weak dollar by popping in on Mickey and scooping up related character paraphernalia on the cheap. The point: If the dollar starts to rise in value again in proportion to the euro and other currencies, this trend could reverse itself.

Based on all of the above, Disney could pop at the open this morning. The after-hours excitement on Tuesday was pretty big.
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