Japan Disaster Will Have Greater Financial Impact on Disney Than 'Mars Needs Moms' (Analyst)

2:13 PM PST 03/16/2011 by Paul Bond

Poor performance of motion capture film will only affect one percent of company's 2011 earnings.

The poor performance of Mars Needs Moms will wipe out only about 1% of Disney's earnings this fiscal year, but the earthquake and tsunami in Japan could hurt the company somewhat more, an analyst said Wednesday.

Disney had already written down a portion of Mars Needs Moms when it shuttered the ImageMovers Digital studio last year, but it might take another write-down in the $30 million-$50 million range during the fiscal third quarter, Morgan Stanley analyst Benjamin Swinburne told clients in a research note.

Swinburne figures the film, which cost $150 million to make and has collected a measly $8.6 million domestically since opening March 11, will cost Disney two or three cents per share in annual earnings.

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The Japan catastrophe, though, could cost Disney a nickel or six cents per share. Mars and Japan together might destroy up to 3% of Disney's earnings unless gains at ESPN offset the bad news elsewhere.

The risks to Disney in Japan include film distribution and the Disney Stores there, as well as Tokyo Disneyland, which the company doesn't own but collects a license fee based on sales. In fiscal year 2010, the fee amounted to $240 million and accounted for 18% of operating income in Disney's parks' segment, Swinburne wrote.

Swinburne did not change his opinion on the stock, which he rates "overweight," nor on the media-entertainment sector, which he calls "attractive."

During a bad day on Wall Street, Disney shares fell $2.5% Wednesday to $40.60. The Dow Jones Industrials fell 2% Wednesday and the Nasdaq was off 1.9%.

 

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