Heroic 'Avengers' pushes Disney to new high

Strong earnings and high hopes for the superhero flick offset the ugly 'John Carter' debacle.

By InvestorPlace May 9, 2012 10:35AM

By Jeff Reeves

For entertainment company Walt Disney (DIS), it was an epic war between an arch-nemesis and a group of superheroes. And in keeping with typical Hollywood endings, the good guys arrived in the nick of time to save the day.

I'm not talking about the next project for the Mouse House, though. I'm talking about the company's balance sheet.

The fact is that mega-flop "John Carter," released in March, had left a mammoth hole as some observers labeled the dud Disney's biggest failure ever. But thanks to a recent surge in theme park revenue and a blockbuster weekend from the opening of "The Avengers," it appears Disney gets a happy ending to the mess.

"The Avengers," with characters based on those from comic book icon Marvel, was a box-office superhero for Disney last weekend. The flick racked up more than $200 million in ticket sales in its debut to achieve the biggest opening weekend in movie history.

Then Disney followed up that showing with its fiscal-second-quarter earnings report -- posting an impressive 21% rise in profits, thanks to theme-park and cable-television profits. That topped forecasts, silencing critics and sending Disney stock to a new 52-week high in trading Wednesday.

Specifically, net income grew to $1.14 billion from $942 million a year earlier. Excluding special items, that worked out to 58 cents per share, handily beating the target of 55 cents per share.

All this even though the costly 3-D adventure "John Carter" will end up costing Disney $200 million, according to the company. To top expectations with a big loss like that on the books is no small feat.

So how did Disney pull this off? Theme parks provided a big lift, as operating profit at that division surged 53%. Attendance was up, room rates were up, and properties both at home and overseas in Tokyo and Hong Kong were moving steadily upward.

But the reason for the surge in shares isn't just that the company managed to offset the brutal loss of "John Carter." It's also the red-hot opening of "The Avengers," which wasn't even factored in to the success in fiscal Q2. Those profits are going to be rolled into the next earnings report.

And to hear Disney tell it, profits also will be rolled into the next, and the next, and the next . . .

This week's conference call to discuss earnings focused on efforts to crank out a sequel -- even before "The Avengers" finishes its run. Disney is also racing merchandise into stores and plotting to get the characters into its parks to keep those metrics moving upward.

You couldn’t write a better script for the end-of-quarter showing. After the horrendous results of "John Carter" and odd ideas like Disney-themed Starbucks (SBUX) shops, investors undoubtedly are looking at action figures of Captain America or Iron Man and sighing, "My hero!"

Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace​​.com or follow him on Twitter via @JeffReevesIP. As of this writing, Jeff Reeves did not own a position in any of the aforementioned securities.

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May 9, 2012 2:28PM
Sadly John Carter was an excellent movie that if marketed properly would have made alot more money.
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