- LOS ANGELES (Reuters)
- Shares of Walt Disney Co. DIS.N fell sharply on Friday to their lowest
levels in nearly eight years after it posted weak quarterly results from
slack theme park attendance and warned of worse conditions ahead.
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- Disney's tumbling share price also sent stocks of travel
and leisure companies downward in sympathy as much of the company's current
weakness was tied to sluggish tourism at Disney's theme parks like Walt
Disney World in Florida.
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- Debt rating agency Standard & Poor's weighed in,
too, saying it may cut Disney's long-term corporate credit rating.
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- Following Disney's fiscal third quarter earnings report
late Thursday, Chief Financial Officer Tom Staggs said theme park reservations
were down about 10 percent in the current quarter, leading to lower-than-expected
fourth quarter profits.
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- "The company's outlook was decidedly more negative
than our expectations," Merrill Lynch analyst Jessica Reif Cohen said.
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- Disney shares closed down 9 percent at $15.31 on the
New York Stock Exchange, after reaching as low as $14.91 during the session,
a level it last reached in November 1994. Volume was nearly four times
its 90-day average.
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- The Burbank, Calif.-based media giant, with interests
in TV, film, music, radio and theme parks, reported a fiscal third quarter
net profit of 18 cents a share, adjusted for accounting changes and operating
income of 17 cents a share.
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- While the earnings came in line with forecasts, Wall
Street focused on Disney's warning and low visibility for 2003.
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- In a conference call with analysts following the earnings
report, Staggs declined to offer specific guidance for fiscal 2003, which
begins Oct. 1, 2002.
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- "You are seeing an economy that is sending decidedly
mixed signals. I see signs of underlying strength, but there are other
leading indicators that are anything but strong," Staggs said, adding
forecasting now was "pretty perilous."
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- Merrill's Reif Cohen slashed her fiscal year 2003 operating
income estimate by $530 million to $3.3 billion and her fiscal 2003 earnings
estimate by 25 percent, or 22 cents a share, to 65 cents a share from 87
cents a share.
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- "While some of the weakness in the September quarter
may be attributed to concerns of more terrorist attacks around the anniversary
of 9/11, we also believe that the trends reflect the softening of the U.S.
economy," J.P. Morgan said in a research report.
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- The firm cut Disney's stock rating to a "long term
buy" from "buy" rating.
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- Goldman Sachs reduced the stock to "market outperform"
from "trading buy."
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- UBS Warburg maintained its "hold" rating but
cut Disney's share price target to $18 from $27.
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- The slide in Disney shares also impact other leisure
stocks, particularly in the hotel/casino space.
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- "We're all looking at Disney's numbers and particularly
what they said about weakness in the current quarter and its got the investment
community spooked about a decline in demand overall," Bear Stearns
analyst Jason Ader said.
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- Stocks of casino companies MGM Mirage MGG.N and Mandalay
Resort Group MBG.N and hotelier Marriott International Inc. MAR.N came
under pressure.
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- On the New York Stock Exchange MGM stock closed down
$1.61, or 4.7 percent, to $32.52, while Mandalay shares ended off $1.59,
or 5.7 percent at $26.50.
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- Marriott shares fell $1.65, about 5 percent, to $31.45,
and Hilton Hotels Corp. HLT.N lost 5.8 percent to $11.40.
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- Media shares fell, too. AOL Time Warner Inc. AOL.N ended
down 9.5 percent at $10.25, Viacom Inc. VIA.N fell 8.1 percent to $35 and
Vivendi Universal EAUG.PA V.N ended down about 4.6 percent at $14.45. (With
additional reporting by Sinead Carew in New York)
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