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The Zacks Analyst Blog Highlights: Walt Disney, News Corp., Time Warner, Priceline.com and Expedia

DIS NWSA TWX PCLN EXPE

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For Immediate Release

Chicago, IL – November 1, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include The Walt Disney Company (DIS - Analyst Report), News Corporation (NWSA - Analyst Report), Time Warner Inc. (TWX - Analyst Report), Priceline.com Inc. (PCLN - Analyst Report) and Expedia Inc. (EXPE - Analyst Report).

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Here are highlights from Wednesday’s Analyst Blog:

Disney to Buy Lucasfilm

 

mid a difficult operating environment, The Walt Disney Company (DIS - Analyst Report) continues to deploy its capital toward its core strategies, which include enhancing the portfolio of its globally recognized brands, to drive long-term growth. One such move is the company’s recent agreement to acquire Lucasfilm Ltd.

Disney agreed to acquire George Lucas’ Lucasfilm Ltd. for a cash and stock deal worth $4.05 billion. Disney stated that it will pay half of the amount in cash and will issue 40 million shares on closure.

Walt Disney is one of the world’s largest diversified entertainment companies and commands a formidable portfolio of globally recognized brands, primarily its namesake brand – Walt Disney, followed by ABC, ESPN, Pixar and Marvel Entertainment. These renowned brands offer a strong competitive edge to the company and bolster its well-established position in the market against major players like News Corporation (NWSA - Analyst Report) and Time Warner Inc. (TWX - Analyst Report).

As per the agreement, Disney will get hold of Lucasfilm, including its renowned ‘Star Wars’ and Indiana Jones franchises. Further, Disney will also acquire the operating businesses of the company, including live-action film production, animation, visual effects, consumer products and audio post production. Moreover, Kathleen Kennedy, the current Co-Chairman of Lucasfilm, will be the President of Lucasfilm.  

We believe the acquisition will not only fortify Disney’s position but will also expand its world-class portfolio of content while creating long-term opportunities by driving revenue growth through its multiple platforms, which include theme parks, consumer products, media networks and studio entertainment.

We maintain a long-term Neutral recommendation on the stock. Moreover, Disney currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

 

Earnings Preview: Priceline.com

 

Priceline.com Inc. (PCLN - Analyst Report) is scheduled to announce its third-quarter 2012 results on November 1, 2012. We witness no movement in analyst estimates in the build-up to the release.

Prior-Quarter Synopsis

Priceline’s second quarter was quite good, with earnings beating the Zacks Consensus by 51 cents, attributable to strong revenue growth, strong international bookings growth, as well as higher margins.

Revenue for the quarter was up both sequentially as well as from the year-ago quarter, driven by strong volumes across the business, with hotel room nights, rental car days and airline tickets, all growing sequentially. Room nights and rental car days were also up strong double-digits from last year, although airline tickets were flat.

The gross margin was also up 402 basis points (bps) sequentially and 774 bps year over year, attributable to higher volumes in the international business, helped by better pricing in the U.S.

(Detailed earnings results can be viewed in the blog titled: Priceline Shares Feel Macro Pressure)

Third Quarter Guidance

Priceline expects total gross bookings to grow in a range of 10–18% year over year, with international bookings growing 12–20% (up 23–31% on local currency basis) and domestic bookings growing around 5%. This is expected to yield a year-over-year revenue increase of 9–15% ($1.63 billion at the mid-point).

Pro forma EPS is expected to be in a range of $11.10–$12.10, while GAAP EPS is estimated in a range of $10.21 to $11.21.

Agreement of Analysts

Out of the 11 analysts providing estimates, none revised their estimates for the third quarter as well as for fiscal 2012 in the last 30 days.

Priceline’s revenue has increased double-digits over the past few quarters and the analysts expect the trend to continue in the upcoming quarter. They expect a healthy third quarter, with earnings coming in at the higher end of the guidance, on strong room night growth, industry data and strong results from Expedia Inc. (EXPE - Analyst Report).

The analysts see potential for accelerated share gains, helped by the extension of Booking.com and Agoda brands into new markets. They contend that International bookings growth will remain strong in 2012 and Booking.com will continue to take meaningful share of the European hotel market.

However, the analysts remain cautious about the higher domestic airfares, weakening hotel metrics and overall headwinds in Europe. They expect third quarter guidance to be impacted by unfavorable foreign currency movements and macro headwinds.

Magnitude of Estimate Revisions

In the past 30 days, the Zacks Consensus Estimate remained unchanged for the third quarter as well as for fiscal 2012 at $11.47 and $28.85, respectively.

Over the 90-day period, the Zacks Consensus Estimate was down 87 cents for the third quarter and by $1.05 per share for fiscal 2012.

Our Recommendation

We expect Priceline to report a decent third quarter, with strong execution and strength in the hotel business, driven by share gains and new businesses.

Though the overall trends look extremely strong, we remain a little concerned about the headwinds in Europe. We also believe that Airline tickets will likely remain a weak spot due to continued capacity cuts and price hikes.

Longer term, we believe that Priceline remains well positioned to sustain its growth as consumers now prefer the Internet for making travel plans and seek the benefit of discounted prices offered by ecommerce companies like Priceline, rather than the time consuming offline ways.

Additionally, Priceline is expected to continue investing in the business to push growth further and especially to continue its international expansion strategy. This is likely to result in some downward pressure on earnings.

Priceline retains a Zacks #4 Rank, which translates into a short-term Sell rating.

 

 

 

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