IMAX (NASDAQ: IMAX) really missed Wall Street's expectations. In its latest earnings release, issued on Monday, the company said that its net loss per share doubled to $0.25 for the first quarter compared to the 2007 quarter when the net loss was $0.12 per share. Revenues were $23.5 million, a 12% decline.
While that performance is bad enough in itself, it was also below expectations with the bottom line missing by $0.11. Yikes! Revenues were likewise a disappointment. Even with all the snazzy content from studios such as Time Warner (NYSE: TWX), Viacom (NYSE: VIA), Disney (NYSE: DIS) and DreamWorks Animation (NYSE: DWA), IMAX is having a tough time getting its stock out of the single digits. Management is hoping that a stronger slate for the rest of the year will have a positive impact.
Maybe it will, maybe it won't. IMAX is a stock I have no interest in buying. The company sports a negative book value at the moment, and the stock's past performance has been pretty terrible. I have to concede, however, that on a shorter-term period, the stock has been strong -- in fact, it is not too far from a 52-week high.
As one can imagine, many are speculating that IMAX has a great future ahead of it as the company transitions to digital platforms (this article at USATODAY.com provides an excellent summary of the bull argument, as well as issues IMAX has had with financing). Also, I'm sure many are speculating about a potential sale of the company at some point.
Hey, I'm not going to necessarily rain on the long-term thesis for IMAX, but I have to be honest and say that I'd have to see a breakout from here and some better numbers next quarter to even think about starting a position.
Disclosure: I own shares in Disney; positions can change at any time.
There's a great article over at The New York Times. It's about all the changes happening at the broadcast networks concerning the traditional upfront model -- the practice of presenting to advertisers around the month of May a new portfolio of programming to be commenced in the fall season and the subsequent booking of ad dollars for said programming. That's how the process has worked -- CBS (NYSE: CBS), General Electric's (NYSE: GE) NBC, Disney's (NYSE: DIS) ABC, News Corp.'s (NYSE: NWS) Fox, and Time Warner's (NYSE: TWX) and Viacom's (NYSE: VIA) CW show their wares now so that they can sell commercial inventory well ahead of the season premieres.
Well, according to the article, you can thank -- or blame -- the writer's strike for the dismantling of this quaint mechanism. I chose to thank the strike, because I think change is good in this case. You see, the broadcasters want to move to a 52-week season -- i.e., they want to debut new shows on a year-round basis instead of all at once, thus neutralizing the need for big upfront promotions. Actually, I should point out that there were probably other factors that helped this decision along -- most of them centering around costs and expenses. The expensive pilot-development process just isn't where it's at anymore. In fact, I wrote about this new paradigm back in April when NBC's co-chairman Ben Silverman was embracing it -- he's actually going for a 65-week season!
Disney (NYSE: DIS) reported earnings earlier in the week, and once again, Bob Iger pleased Wall Street with the media company's latest results (for a look at the numbers and an options-trading idea for Disney, see Brent Archer's recent piece about the Mouse). They more than beat expectations, but as a Disney shareholder, I'm somewhat blase about the whole affair. Sure, Iger is being feted as a CEO wunderkind who has successfully steered the S.S. Disney into prosperous financial seas after taking the wheel over from failed captain, Michael Eisner. But, you know, I've owned Disney for ten years now, and I just don't like the price action of the stock -- it hasn't gone anywhere since the last split back in 1998. And, I can't say that the stock performed spectacularly this week post the earnings win.
I think Iger needs to start worrying about the stock. Yeah, he'd probably tell me something like "I'm busy leveraging the Disney brand to differentiate its content from other media concerns to drive increases in returns on capital and earnings per share -- the stock will take care of itself." Ha! The stock has done nothing. Iger should pay attention to the sad long-term range that symbol DIS has been in for what seems like an eternity. Here's my suggestion -- double the dividend, Bob. You can do it.
A look at the company's most recent 10Q (for the quarter ended March 2008) shows an interesting cash-flow story. Okay, cash from operations for the last six months came in at $3.3 billion. Capital expenditures and acquisitions together equaled $759 million. Dividends were $664 million. Add $759 million and $664 million together and you get $1.4 billion. I think there's a lot of breathing room there, Bob. In fact, if you brought dividends up to an even $2 billion, you still would have covered cap-ex and acquisition costs. And remember, Disney pays an annual dividend, so that $664 million was for the whole year! Imagine if you spread $2 billion out over four quarters. You could easily double it, Bob. In fact, a check of the most recent 10K shows that cash flow has been excellent the last few years. Disney, by my calculations, could have supported a much higher dividend back in 2005!
I mean, revenues increased 16% to about $8.8 billion, but earnings per share went up like crazy, coming in at $0.91 per diluted share versus $0.27 per diluted share a year ago -- that's more than three times as much as the comparable period's results! As you can imagine, there's a little catch. The stellar appreciation is due to a gain in a transaction with Liberty Media. According to a piece at CNBC, News Corp. earned $0.30 per share after adjustments, which was a penny shy of Wall Street's expectations.
So, News Corp. kind of had a so-so quarter. I think the top-line growth was pretty good even if bottom-line performance wasn't as nice as that special gain made it seem on the surface. Plus, News Corp. is working with some cool assets. Cable programming continues to score thanks to the strength of Fox News Channel, an important platform for the conglomerate which contains valuable brand name pundits such as Bill O'Reilly and Sean Hannity. News Corp. leverages the channel to drive growth in its other cable properties; in fact, Fox Business Channel is trying to make a name for itself and it definitely benefits from synergy with Fox News.
Overall, the cable programming segment delivered a 17% increase in operating income while Fox News saw its operating profit go up by 11%. The television segment increased its profits by over 50%, and the Fox network just about doubled its bottom-line base. Other parts of News Corp. didn't do as well, such as filmed entertainment -- this segment's profit took a dive to the tune of 36%. However, don't blame one of my favorite shows, Family Guy -- DVD sales of this hot property was a positive driver.
Those are the highlights that stuck out at me. As for the stock, I don't see a compelling reason to buy at the moment. News Corp. should do well over time, but it wasn't like these were blowout numbers or anything. I'll wait and see how the company is doing when it reports its fiscal-year stats.
Disclosure: I own shares in Disney; positions can change at any time.
News Corp (NYSE: NWS) did better than Wall Street expected. With one-time items backed out, the numbers were not quite as good, but were still impressive.
Hidden in among the numbers and news about the success of Fox and the company's cable operations were comments by chief Rupert Murdoch that the economic climate is going to start to bite advertising. "There's no doubt the consumer economy is stressed. You're seeing it affected in advertising, more short-term planning and booking," said the News Corp chairman and chief executive is quoted by Reuters as saying.
The observation should give pause to investors in News Corp and shareholders in other global media companies and advertising agencies. Murdoch's operation are structured very much like Viacom (NYSE: VIA), Disney (NYSE: DIS), and Time Warner (NYSE: TWX).
There had been some hope that advertising expenditures would not fall as the economy slowed. First quarter results from several media shops were decent. But the unlucky consumer, hit by rising fuel and food prices cannot spend on forever. Murdoch knows that and just wanted to pass it along.
The Daily News reports that ratings for Walt Disney Company (NYSE: DIS) Hannah Montana program are down 24% since Mileygate broke last week. Last Sunday's new episode's ratings fell 24% from the previous fresh episode, which aired just under two months earlier. And ratings are down 33% since the first episode in January.
Disney thinks everything's fine with Miley. The Daily News quotes CEO Bob Iger as saying: "With a new season of shows coming up, a new record in July and a theatrical film next year, the 'Hannah Montana'/Miley Cyrus franchise is incredibly robust." But kid franchises such as "Hannah" that peak at very high levels are good for roughly 18 months, then start to fade.
Will this have any effect on the $1 billion business that is Miley Cyrus? It depends on whether she can find a new -- older -- audience and deliver what it wants as effectively as she did for the 10 to 14 set. If Mileygate helps her do that then her business will be fine.
After hitting a one-year high of $36.79 last May, the stock hit a one-year low of $26.30 in January. DIS opened this morning at $34.21. So far today the stock has hit a low of $34.05 and a high of $34.95. As of 11:45, DIS is trading at $34.92, up $1.19 (3.5%). The chart for DIS looks neutral and deteriorating slightly, while S&P gives the stock its highest 5 Stars (out of 5) strong buy rating.
For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $30 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in just two and a half months as long as DIS is above $30 at July expiration. Disney would have to fall by more than 14% before we would start to lose money. Learn more about this type of trade here.
World Wrestling Entertainment (NYSE: WWE) stepped into the Wall Street ring on Tuesday -- and lost. The company's stock dropped about 8% at closing on the Q1 earnings release (it did recover a bit during the after-hours session). I'd probably call this profit-taking, although there was one thing about the earnings report that I didn't like: free cash flow.
Let me say first, though, that revenues increased more than 50% to $162.6 million, and that earnings per share rose almost 29% to 27 cents (according to Briefing.com, this matched expectations). This is excellent growth, and it shows the resilience of wrestling as an entertainment brand; sure, many on Wall Street may not take the company seriously, but they're wrong. I enjoyed, by the way, that WWE increased the buy-rates for its Royal Rumble and No Way Out pay-per-view events. Pay-per-view is a very vital part of WWE's operations, in my opinion. And let's not forget a big driver for the quarter -- Wrestlemania XXIV -- which brought in more than million buys.
Unfortunately, free cash tumbled off the mat, decreasing 77%. And, no, the amount generated did not cover the generous dividend that WWE pays. I would really like to see free cash flow do well every quarter since WWE has been a steady dividend-increaser over its time as a public company. Management must focus on the cash-flow statement and make it a priority.
U.S. stock futures were lower early Wednesday as investors, worried about inflation, await data on pending home sales and labor costs. Earnings news in focus this morning comes from tech bellwether Cisco Systems, which gave a cautious outlook, and from Walt Disney, which reported good results.
Despite starting the day on a down note, as oil futures remained high, U.S. stocks closed higher on Tuesday, mostly due to some reassuring comments made on a Fannie Mae (NYSE: FNM) conference call. The Dow industrials ended up 51 points, or 0.40%, the S&P 500 rose 10 points, or 0.77%, and the Nasdaq Composite finished 19 points, or 0.78%, higher.
Today investors will finally have some data to sink in their teeth. First quarter labor productivity and unit costs is out at 8:30 a.m. EDT. Economists expect productivity to rise 1.5% in the first quarter, but for unit labor costs to climb as well.
Also on the docket today are March pending home sales data to be released at 10:00 a.m. and which probably fell another 1%.
After that, weekly crude inventories are scheduled to be reported. Crude futures have held up near $122 a barrel despite the dollar advancing against the yen and the euro.
Disney (NYSE: DIS) did better than expected. According to the company, EPS rose 35% to $.58. Revenue was up 10% to $8.71 billion. Wall Street focused on the success of Disney's theme parks, believing they are a good indication of consumer spending. If so, economists should be happy.
Revenue for the company's parks and resorts moved up 11% to $2.725 billion. Operating income was up 33% to $339 million.
Nice picture, if it is true.
The consumers who go to Disney theme parks tend to be affluent. That is in the sense that they can spend several hundred dollars or more on tickets, food, and hotels. That leave out all of the people who did not come. That would include those who could not afford the airplane tickets, gas, and toys for their kids.
Economists will seize the theme park numbers and hail them as good news. They will say the consumer is OK. But, the increase in revenue for these operation was less than $300 million. That is hardly a bounce in the consumer sector.
Recently, Jonathan Berr took a look at CBS (NYSE: CBS) and its latest quarterly results. One of the things I found most interesting about the earnings release was the fact that CBS's dividend reputation is very much intact -- management raised the quarterly payout by 8% to $0.27 per share. It can certainly afford to do this as free cash flow was up 25% in the last quarter, and the amount was more than adequate for the dividend. CBS has been pretty good about increasing the payments, but I happened to come across a headline at CNBC that talked about Jim Cramer's concerns about CBS -- he basically would rather the media company focus on growth instead of income.
His point is a good one, and well-taken -- after all, growth is pretty darn exciting. But I think CBS management has been great at sharing the spoils with its stockholders, and I always think it's a neat thing when a media stock yields a decent amount. CBS currently yields 4.5% based on Monday's closing price -- that's a lot bigger than the yields offered by Time Warner (NYSE: TWX) and Disney (NYSE: DIS). Yes, it's a cliché, but shareholders are getting paid to wait, and that's awesome if you intend to hold the stock for a long time. As a Disney shareholder, I can tell you that CBS's yield makes me envious!
I think CBS will turn out to be more than just an income play though. I'm confident the company will grow the price of its stock over time. Granted, major networks aren't what they used to be in this world of cable television, but the landscape continues to change with new digital distribution models popping up all the time, and networks like CBS are looking to participate wherever it makes sense to do so. Considering CBS's ability to generate cash and its willingness to share, I have a feeling capital appreciation will eventually follow the dividend boosts.
Disclosure: I own shares in Disney; positions can change at any time.
Stock futures were lower early Tuesday morning as oil prices remained high offsetting any recent optimism about the economy in light of Monday's surprise expansion in the service sector. Several companies are also reporting earnings today and will be in focus.
U.S. stocks dropped on Monday after Microsoft withdrew its takeover bid for Yahoo and as commodity prices once again spiked. The Dow industrials lost 88 points, or 0.68%, the Nasdaq Composite fell 12 points, or 0.52%, and the S&P 500 lost 6 points, or 0.45%.
Without much economic news today, no doubt investors will have no choice but to focus on the high oil prices. After setting a record close Monday and hitting a new trading high of $120.93 a barrel Tuesday, crude retreated to $119.88, down 9 cents from Monday's close. It is interesting that just as hopes were growing the slowdown of the US economy may not be as deep and long as originally thought, crude prices surge again, concerning investors about inflation and profits once again.
Tomorrow afternoon Walt Disney Co.(NYSE: DIS) will be answering Wall Street's questions about the strength of its US amusement parks when it reports its second quarter earnings.
The last time that Disney reported earnings was February 5, when the company topped analysts' estimates of 52 cents per share by a whopping 11 cents.
This time, analysts expect earnings of 51 cents a share on sales of $8.51 billion, compared with 43 cents and revenue of $8.07 billion a year earlier. Sales are expected to decline year-over-year as a result of the weak market conditions hurting Disney's theme parks, particularly its Walt Disney World in Florida.
There's a great article over at 
News Corp
World Wrestling Entertainment
U.S. stock futures were lower early Wednesday as investors, worried about inflation, await data on pending home sales and labor costs. Earnings news in focus this morning comes from tech bellwether Cisco Systems, which gave a cautious outlook, and from Walt Disney, which reported good results.
Tomorrow afternoon 
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