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.
Playboy's (NYSE: PLA) shares are hovering near a 52-week low as I write this. The catalyst, you ask? The sexy company reported some dismal earnings this week. Net sales decreased 8%. The net loss came in at $0.09 per diluted share versus positive net income of $0.04 per diluted share in the previous year's quarter.
Even if you look at some of the adjustments, the Playboy story just isn't a seductive one. And according to a Reuters article, expectations were for a profit of $0.06 per share after adjustments. The net income of each Playboy operating division headed in a downward direction. And publishing, well -- that's been the saddest segment of all for a while now.
I have a question for Christie Hefner: Are you serious about turning your father's company around? Seriously. I've been giving Playboy the benefit of the doubt now for quite some time, and I'm not sure I can do that anymore. I want to, believe me; I'm a guy who has always been in love with the Playboy lifestyle. And, remember, the invitation is always open if you need me to come over to the Mansion to help you generate some new marketing strategies.
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.
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.
Yahoo! (NASDAQ: YHOO) shares traded at $29.70 after hours Friday as it appeared that a buyout deal from Microsoft (NASDAQ: MSFT) was likely. Now that Microsoft has walked away after offering $33, where does the Yahoo! stock price go?
Probably to about $22. Here are the reasons why:
1. Yahoo! traded at $19 the week before the offer.
2. Yahoo!'s earnings for Q1 were only modest. So were its forecasts. No one on Wall Street believes the company's aggressive three-year projections. This actually puts some downward pressure on the stock.
3. Microsoft may come back. Their new offer, probably several weeks off, if they make one, will almost certainly be below its initial $31 price point because Yahoo!'s shares will have fallen. A new MSFT offer will probably be in the $25 to $27 dollar range. This should give the stock some support.
4. Yahoo! could outsource some of its search functions to Google (NASDAQ: GOOG) and potentially save hundreds of million of dollars in personnel. Google does a better job of making money from search ads, so a transaction with the search company could also improve revenue. This should help keep Yahoo!'s share price from collapsing. There is a chance the the federal government would view a deal between the two largest search companies as anti-competitive.
5. There is still a chance the Yahoo! could do a transaction with News Corp (NYSE: NWS) for MySpace or Time Warner (NYSE: TWX) for AOL. It is tough to handicap what this would do to the Yahoo! shares.
Look for the Yahoo stock to settle at $22 in the next week.
Douglas A. McIntyre is an editor at 247wallst.com.
Since last year's summer movie preview featured mostly sequels and adaptations, this year's preview has been expanded to include more than just potential "blockbusters." The following is a chronological list of not only the most hyped film fare of the summer, but other noteworthy smaller entries, and a short commentary on each.
5/2 - Iron Man, Viacom (NYSE: VIA)'s Paramount Pictures The first of two big Marvel Entertainment (NYSE: MVL) adaptations of the summer, the Robert Downey Jr. led Iron Man has been getting a ton of hype and critical acclaim. This is the second year that a comic book adaptation has kicked off the summer, following last year's Spider-Man 3, which grossed over $150M over its opening weekend.
5/9 - Speed Racer, Time Warner (NYSE: TWX)'s Warner Bros. Another big-budget adaptation of a generations-old cartoon. Last year's Transformers was, to my surprise, a huge success, so maybe Speed Racer, in the capable directing hands of the Wachowskis, can be as well.
So, Mr. Softy CEO Steve Ballmer couldn't take the heat anymore. For all his talk about walking away and hostile bidding, he decides to try and make nice with the Yahoo! (NASDAQ: YHOO) board by apparently raising his offer. This man must feel that Microsoft (NASDAQ: MSFT) desperately needs the internet portal (it doesn't). While Yahoo! is definitely a prime force on the 'net, I have to say that, in my opinion, Ballmer should've just stuck to his tough guns and left Yahoo! at the table. But, according to this AP item, The New York Times has indicated that the original $31 per share offer has possibly been increased by "several dollars," this according to that old standby "unnamed sources." The article even indicates that $35 is potentially feasible.
I've got to believe that most Microsoft shareholders will feel aggravated by this. The goofy dance that has been going on between Ballmer and Yahoo!'s CEO Jerry Yang has been, to say the least, trying. I mean, who wants to see Microsoft spend all that money on a company that may or may not properly synergize with Mr. Softy's core competencies. Isn't focusing on the cash-cow operating-system monopoly of more importance? Isn't theOffice franchise worth increased attention? What about the success of the Xbox 360 -- why would Ballmer want to now get sidelined integrating the Yahoo! brand when the Xbox brand is starting to show mega long-term promise? These are the things that went through my mind when I first heard of the Microsoft bid. I mean, seriously, I can't believe $50 billion is now conceivably on the table as a bid for the portal. Sure, Yahoo! is valuable, but probably to another, more suitable company; as an example, I didn't think a combo between Time Warner's (NYSE: TWX) AOL and Yahoo! was that off the wall.
The way I see it, Microsoft is an innovative software company that should concentrate on increasing its free cash flow to grow dividends over time and to make selective, smaller acquisitions that don't require leaps of faith when it comes to integration. I thought Ballmer believed what he said when he stated that Microsoft doesn't need Yahoo! But, I guess Google (NASDAQ: GOOG) is getting under his skin, and his ego would have been too bruised if he failed in his quest to win over the Yahoo! board. Whatever; I still like Microsoft stock on a long-term basis, but I really would have liked it if the most famous software giant in the world didn't take on the risk of owning Yahoo!
Disclosure: I don't own shares in any of the companies mentioned here; positions can change at any time.
This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and check out other Battle of the Brands posts.
The heads of CNN, Fox News, and MSNBC along with their corporate masters at Time Warner Inc. (NYSE: TWX), News Corp. (NYSE: NWS) and General Electric Co. (NYSE: GE) must be giggling with delight at the prospect of the Democratic presidential race continuing past the hotly contested race in Pennsylvania.
After all, controversy means more viewers, which of course means more advertising dollars. They probably wish that the Democrats would beat each other up in 30-second TV spots every year, but alas Americans elect a president every four years, which is probably a good thing for everybody. Still, the cable networks are going to ride this gravy train for as long as they can.
Like anything else in cable news, picking a winner in this battle of the brands depends on how you look at it. Fox, the home of Bill O'Reilly and Shepherd Smith, attracted 1.89 million viewers during Monday's prime time, the most of any network, according to Nielsen data cited by TVNewser. CNN attracted 1.03 million on its main network and 572,000 on its Headline News channel, while MSNBC was watched by 676,000.
Before conservatives start declaring Fox the top cable network yet again, remember that statistic does not represent the whole picture. Cable news advertisers are most interested in viewers aged 25 to 54 who are most likely to be interested in buying mutual funds and other products that they are shilling. That's where things get interesting.
Meebo, a web-based service that allows multiple and simultaneous instant messaging accounts, has raised $25 million, according toReuters, to expand the revenue potential of the business, especially in Asia. Investors include Time Warner Inc. (NYSE: TWX), Japanese-focused Jafco Ventures and co-investor KTB Ventures, the U.S. arm of Korea's largest private equity shop, KTBnetwork.
This is the third round of funding for Meebo for a total of $37.5 million. The CEO, Seth Sternberg, 29, plans to use the funding to expand into Asia markets and to build a sustainable revenue model. Additionally, he wants to add Meebo chat rooms to Time Warner sites, including People magazine. Recently, Meebo hired Carter Brokaw as its chief revenue officer. He formerly worked at CNET Networks (NASDAQ: CNET)
Meebo has 30 million users per month and includes instant messengers such as Yahoo! Messenger from Yahoo! Inc. (NASDAQ: YHOO), AOL Instant Messenger, Google Talk from Google Inc. (NASDAQ: GOOG) and ICQ. It was estimated by alleyinsider.com that Meebo is worth $220 million.
Jon Ogg is a producer and editor for the "10 Stocks Under $10" weekly newsletter for 247WallSt.com.
Microsoft (NASDAQ: MSFT) may be much better off by not overpaying for Yahoo! (NASDAQ: YHOO). To pay almost $45 billion for a company that's really struggling seems extreme -- especially since I think Time Warner (NYSE: TWX) will spin out AOL in a few months. Microsoft could buy AOL much, much cheaper than Yahoo.
AOL brings to the table both traffic and many properties, including BloggingStocks! The problem is that revenue is declining and so are unique visitors, down from 110 million average unique visitors in the fourth quarter, to 109 million in Q1.
I think that with Microsoft's focused management, it could achieve the same turnaround at AOL that it is anticipating achieving with Yahoo, only it would not have to spend $45 billion.
Some analysts have said that AOL is a consolation prize for the loser in the Yahoo! battle. I think Yahoo! is the booby prize and AOL might just be the better deal.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 5/1/08
News Corp
Playboy
World Wrestling Entertainment
Here are some highlights from this past week's 
Here are some highlights from this past week's 
This post is part of our 
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