BMO Capital Maintains Neutral View on Disney (DIS) Following Q4 Results

BMO Capital analyst Daniel Salmon reiterated a Market Perform rating and $110 price target on Walt Disney (NYSE: DIS) following FY4Q15 EPS of $1.20 was above our $1.11 and consensus of $1.14. OI for Media Networks and Studio Entertainment were above our expectations and consensus; Parks and Consumer Products were below and Interactive was in line.

Salmon commented, "Investors likely breathed a collective sigh of relief as Disney offered a consistent tone after Time Warner reduced guidance on Wednesday. However there was also no incrementally positive commentary around the themes that led us to downgrade to Market Perform from Outperform last quarter. Namely: 1) although Disney is exploring options for alternative methods to deliver its content to consumers, like launching the Disney Life SVOD product in the U.K. and signing on to Sony’s Playstation Vue skinny bundle, we believe many options like a direct-to-consumer product for ESPN remain long-term ones, partially due to contractual obligations with traditional distributors. Those challenges should continue to put pressure on ESPN subscribers in the near term; and 2) 2016 capex is expected to be $5.1B, above our prior $3.6B estimate which was raised from $3.2B last quarter. While we view this as money well spent in the long term, our near-term FCF estimates are cut again. We would get more constructive on the shares if 1) skinny bundle subscribers - from Vue, Dish’s Sling and a perhaps an Apple product soon - offset MVPD declines; 2) we get more clarity into early visitor demand for Shanghai as the spring 2016 opening approaches (official opening date will likely be announced before calendar year-end); in the meantime, pre-opening expenses are estimated at $300mm; and 3) the studio’s strong film slate outperforms - this time next quarter, the Force will have awoke."

For an analyst ratings summary and ratings history on Walt Disney click here. For more ratings news on Walt Disney click here.

Shares of Walt Disney closed at $113.00 yesterday.

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