For Immediate Release
Chicago, IL – May 12, 2010 – Zacks.com Analyst Blog features: The Walt Disney Company (DIS), Time Warner (TWX), Viacom (VIA.B), American International Group Inc. (AIG) and Prudential Plc. (PUK).
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Here are highlights from Tuesday’s Analyst Blog:
Disney Beats Despite ABC Losses
The Walt Disney Company (DIS) kept its string of moderate positive surprises intact today when it reported fiscal 2nd quarter 2010 earnings after the bell. The household-name media conglomerate brought in net income of $953 million, or 48 cents per share — 6.67% higher than the Zacks Consensus Estimate of 45 cents. Year over year, Disney improved from 43 cents per share.
Disney posted 7% growth in its Studio Entertainment business, citing impressive box office with its big opening of Alice in Wonderland and recently released Iron Man 2’s strong showing (a direct product of Disney’s acquisition of Marvel Entertainment). But while Cable Networks, Parks and Resorts, Consumer Products and Interactive Media all posted gains, its Broadcasting wing, notably ABC Television and ABC Studios, fell 31.7% in the quarter. Drops in primetime and news advertising revenue were to blame, along with rising production costs.
Analysts had been modestly optimistic leading up to the 2Q10 report. Five of 24 analysts covering Disney had raised earnings estimates for the quarter in the past 30 days, though 2 analysts also revised downward. The 45 cents per share expectation had effectively been unchanged for the entire quarter.
Looking out to fiscal 2010 and 2011 (ending September), analysts are apparently a bit more positive. Five analysts had upwardly revised fiscal 2010 numbers in the past month, and 6 analysts have done so for fiscal 2011 over the same time period.
It has been a mixed bag for media conglomerates this earnings season. While Disney rival Time Warner (TWX) beat EPS expectations by 27% last week, Viacom (VIA.B) came up 30% short when it posted earnings in late April.
AIG, Prudential to Revise Deal?
According to the Financial Times, American International Group Inc. (AIG) and Prudential Plc. (PUK) are discussing a restructuring of their $35.5 billion deal for AIG’s Asian life insurance unit, American International Assurance (“AIA”).
This revision could lead to a $2 billion cut in the cash consideration. The discussion takes place following U.K. regulators’ concerns over the capital position of Prudential, post acquisition.
As per the original deal announced in early March this year, AIG agreed to sell AIA to Prudential for about $35.5 billion. This included approximately $25 billion in cash, $8.5 billion in face value of equity and equity-linked securities, and $2.0 billion in face value of preferred stock of Prudential, subject to closing adjustments. The cash proceeds would be used to repay the Federal Reserve Bank of New York, which rescued AIG from collapsing in 2008.
However, last week, Prudential postponed its $21 billion rights issue offering for financing the AIA deal over concerns of its capital position by the regulators, which fell short of their requirements.
Prudential initially planned for a $5 billion senior debt offering for this deal. However, following the regulators’ concern, the company is considering a restructuring of the debt offering. The company is now planning to issue a part of this amount as hybrid securities, which would be considered for calculating its capital base.
The restructuring of the AIA deal that AIG and Prudential are now considering would end in AIG receiving around $2 billion less in cash and a subscription for the hybrid securities of Prudential.
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