Disney’s doldrums

Stock drops over ABC, 'Hercules' worries

NEW YORK — Walt Disney Co. stock has drifted down over the past 10 days, losing 7% of its value at a time when the broader market has gone up, reflecting disappointment over the performance of “Hercules” and worries about the outlook for the ABC network.

In the past couple of days several Wall Street analysts have reduced their estimates of how much the House of Mouse will earn in the company’s third quarter, which ended June 30, by as much as 12%. Net profit estimates vary between $400 million and $460 million.

Disney stock fell $1.81 to $76.75 Wednesday when the Dow Jones Industrial Average rose 73 points to 7795.38. Disney is one of the 30 stocks that make up the Dow average and usually trades in line with the Dow. Since the start of last week, when the Dow was at 7758.06, Disney has fallen from $82.50.

“Street estimates have been coming down,” said one analyst, who did not want to be named. Part of the estimate revisions follow “Hercules’ ” opening weekend wide release B.O. of $21.5 million last weekend, weaker than most recent openings of Disney animated pics.

Weaker ‘Hercules’

“I had thought that ‘Hercules’ was a stronger picture,” one analyst said, adding that Wall Streeters were also focusing more on the problems at ABC and how Disney has masked the network’s earnings slide with some accounting maneuvers over the past 12 months.

Sanford C. Bernstein analyst Tom Wolzien said he cut his estimate partly because he expects theme park attendance to slow in coming months and partly because of concerns about ABC.

ABC’s downward spiral in the ratings has not had as much impact on Disney’s earnings because of accounting changes made at the time Disney acquired ABC early last year. Schroder & Co. analyst David Londoner estimated earlier this year that the ABC network earned about $160 million in fiscal 1996 but reported profit of $410 million because of the accounting shuffle.

The accounting benefits will disappear in the third quarter. At the same time the appointment of Stu Bloomberg to run the network’s entertainment division over Jamie Tarses has reinforced worries on Wall Street about the impact of management turmoil on the network’s short-term performance.

“There is no question that ABC is a challenge this fall,” said PaineWebber analyst Chris Dixon.

Analysts caution that the worries about Disney are relatively minor. “It’s still the one quality stock in the group,” Wolzien said. At Wednesday’s price, Disney is trading 10% below its 52-week high of $85.12.

Merrill Lynch analyst Jessica Reif said the dip in the stock price could prompt some investors to jump into the stock.

Disney reports its third-quarter earnings later in July. A Disney spokesman refused to comment on Wall Street estimates.

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