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Wednesday, November 4, 1998
"When you find a better place for your money, put it there." -- David and Tom Gardner, The Motley Fool Investment Guide
Not So Magical
Mickey Mouse and the Magic Kingdom were as popular as ever, but fiscal fourth quarter earnings at Walt Disney Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DIS)") else Response.Write("(NYSE: DIS)") end if %> were hurt by declines at the box office in the U.S., lower international home video sales, and higher programming costs at its ABC network. The world's second largest entertainment empire late yesterday reported a 19% drop in operating earnings to $751 million, a 24% decline in net income to $296 million, and a 26% decrease in per-share earnings to $0.14. The figures include charges of $64 million, or $0.02 a share, related to the downsizing of the company's consumer products business and consolidation of certain film studio operations, and reflect pro forma results for the year-ago period for comparison purposes.
Unlike its movie and TV businesses, Disney theme parks and resorts saw strong growth -- an 18% gain in revenues to $1.5 billion and an 11% increase in operating earnings to $301 million -- during the quarter on record attendance, driven by the new Animal Kingdom theme park, higher guest spending at the Walt Disney World Resort and at Disneyland, and revenues from the recently launched Disney Cruise Line. In Disney's Creative Content division, which encompasses film and home video, operating income sank 39% to $253 million. An 8% increase in revenues was more than offset by higher live-action production costs and write-downs related to recent box office flops Holy Man and Beloved, and lower video sales overseas.
A big drag on Broadcasting revenues was ABC's new contract with the National Football League. The division's operating earnings dropped 18% to $197 million, reflecting higher programming costs as well as start-up costs and operating losses related to the ESPN Classic Sports Network, ESPN International, the Disney Channel International, and Toon Disney. Head mouse and CEO Michael Eisner said 1998 was a year for investment in new businesses that "will be important contributors to Disney's long-term growth."
News to Go
Tokyo stocks rallied 4.1% to 14527.81 after Morgan Stanley Dean Witter bigwig Barton Biggs raised his weighting for Japan to 75% from 40% in the Morgan Stanley Capital International Index, spurring buying from abroad. Hong Kong's Hang Seng gained 1.5% to 10508.25, driven by buying in HSBC Holdings.
PepsiCo <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PEP)") else Response.Write("(NYSE: PEP)") end if %> is reorganizing its North American beverage business to focus more on domestic marketing and improve relationships with customers, The Wall Street Journal reported. Philip Marineau, the company's North American beverage chief, is bringing back the job of domestic marketing chief and creating a new group that will combine customer and bottler relations.
Semiconductor yield management and process control systems manufacturer KLA-Tencor Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KLAC)") else Response.Write("(Nasdaq: KLAC)") end if %> announced it has cut its global workforce by about 220 people, or 5%, which will result in a restructuring charge and a net loss in its fiscal second quarter.
Discount carrier Southwest Airlines <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LUV)") else Response.Write("(NYSE: LUV)") end if %> plans to introduce service to Long Island's MacArthur Airport, about 40 miles east of LaGuardia, starting in March or April next year, according to The Wall Street Journal. The Dallas-based airline's debut in New York likely will mean lower fares for travelers -- savings of 50% or more compared with full-priced airlines.
Earnings to Go:
Aetna <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AET)") else Response.Write("(NYSE: AET)") end if %> -- Q3 EPS: $1.21 (excluding Year 2000 costs and other unusual items) vs. $0.98 last year; Estimate: $0.95
Boron, LePore & Associates <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BLPG)") else Response.Write("(Nasdaq: BLPG)") end if %> -- Q3 EPS: $0.24 vs. $0.13 last year; Estimate: $0.22
Qualcomm <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QCOM)") else Response.Write("(Nasdaq: QCOM)") end if %> -- fiscal Q4 EPS: $0.54 vs. $0.42 last year; Estimate: $0.50
Schein Pharmaceutical <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SHP)") else Response.Write("(NYSE: SHP)") end if %> -- Q3 EPS: $0.05 (before charges) vs. loss of $0.02 last year; Estimate: $0.04
Seagram <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VO)") else Response.Write("(NYSE: VO)") end if %> -- fiscal Q1 EPS: $0.27 (before gain) vs. $0.32 last year; Estimate: $0.24
Spelling Entertainment Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SP)") else Response.Write("(NYSE: SP)") end if %> -- Q3 EPS: loss of $0.05 (before charges) vs. loss of $0.20 last year
Steinway Musical Instruments <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LVB)") else Response.Write("(NYSE: LVB)") end if %> -- Q3 EPS: $0.35 vs. $0.28 last year; Estimate: $0.34
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Yi-Hsin Chang (TMF Puck), Writer
Jennifer Silber (TMF Amused), Editor
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