Walt Disney Co reported a rare results miss after Mars Needs Moms capped a disappointing quarter at the U.S. box office, sending its shares down 3 percent.
Strong advertising growth at sports network ESPN and a rise in theme park sales and attendance -- despite a closure at its Tokyo resort after Japan's earthquake -- could not make up for a 13 percent plummet in studio entertainment revenue in the fiscal second quarter.
Disney's popular parks and resorts like Disneyland also took a hit due to the timing of Easter holidays, which a year ago fell in its fiscal second quarter, but this year falls in the fiscal third quarter.
The company also recorded accounting charges from its acquisition of social gaming developer Playdom for $563 million last July.
But analysts say the largest U.S. media conglomerate, smarting from the disappointment of the heavily promoted but poorly attended animated film Mars Needs Moms, can look forward to a strong summer with the fourth Pirates of the Caribbean installment and Captain America.
While I expect the stock to take somewhat of a hit, I would buy on the dip since they will have a strong summer with these blockbuster movies and the TV networks are still experiencing good advertising demand, said Miller Tabak analyst David Joyce.
Executives also dismissed fears that a National Football League walk-out -- killing the 2011 season -- would drive viewers and advertisers away from ESPN, saying any impact would be negligible.
Chief Executive Bob Iger said the coming 'upfronts' negotiation season, during which media networks and corporate sponsors hammer out ad prices for the months ahead, promised to be strong with a rebound in both pricing and demand.
U.S. media firms are riding a rebound in TV advertising as corporate budgets recover from the recession. This month, Time Warner Inc beat Wall Street's expectations on quarterly profit, joining Viacom and CBS Corp in benefiting from a stronger advertising market.
For a breakdown of how the media industry has fared this earnings season: http://r.reuters.com/ryz29r
Shares of the company, which has beaten revenue projections in five of the past six quarters, slid 2.8 percent to $42.68 from a regular-session close of $43.91.
Disney reported revenue of $9.08 billion in the quarter ended April 2. Wall Street had expected revenue of $9.12 billion, according to Thomson Reuters I/B/E/S.
It posted earnings of 49 cents a share, missing an average forecast for 57 cents.
Disney's studio entertainment sales slid to $1.34 billion in the quarter from $1.54 billion a year earlier.
The Parks and Resorts division -- which operates Disneylands around the globe as well as a namesake cruise line -- saw revenue climb 7 percent to $2.6 billion as attendance jumped at the Paris and Hong Kong parks and guests spent more per person.
Iger said bookings for Disney's cruises are very strong with domestic room rates at its resorts double digits percentage wise ahead of a year ago although actual reservations were down by around 2.5 percent.
But that division's operating income slipped 3 percent to $145 million with its Tokyo park closed for weeks in the aftermath of Japan's worst earthquake on record, and after it spent heavily to launch its signature Disney Dream liner in January 2011.
My bottom-line conclusion is that even though the EPS was less than what we were expecting, that was mostly one-off issues, said Evercore Partners analyst Alan Gould.
(Reporting by Yinka Adegoke and Edwin Chan, editing by Bernard Orr)