Media Firms Hurt by Disney Results

Investors hammered media and entertainment stocks on Friday, one day after Walt Disney Co. gave Wall Street the pessimistic news that results will continue suffering from soft theme park attendance.

Although the market overall was down after a weaker-than- expected U.S. jobs report was released--the blue-chip Standard & Poor’s 500 index slid 2.3%--media and entertainment companies in particular took a beating.

The decline reflects investors’ continued disappointment in the media industry’s poor results, its big debt loads, the inability to produce synergies from mergers and accounting questions raised about AOL Time Warner Inc.

Disney and Viacom Inc. suffered the worst. Viacom’s class B stock dropped $3.21, more than 8%, to $34.84 on the New York Stock Exchange.

Shares in Disney tumbled 9%, or $1.52, to $15.31 on the NYSE, sinking to their lowest level since January 1995. That followed the company’s announcement of lower fiscal third-quarter results Thursday after the market closed, and the additional news that Disney is seeing continued softness in its crucial theme park business.

Analysts reacted by slashing their earnings estimates and target stock prices for Disney even though its third-quarter results were close to Wall Street’s expectations. UBS Warburg cut its target price for the stock to $18 from $27.

Merrill Lynch analyst Jessica Reif Cohen in a report said, “The company’s outlook was decidedly more negative than our expectations,” calling theme parks “the primary culprit” because of weaker international tourism.

She cut her fiscal fourth-quarter earnings estimate by 6 cents a share, to 11 cents, although she made a point of noting that Merrill is not downgrading Disney’s stock.

As a result of Disney’s lingering problems, Standard & Poor’s said it placed the company’s investment-grade, A-minus credit rating on review for a possible downgrade in the next three months.

Disney declined to comment on the S&P; action and its stock price drop.

But in an interview Thursday after the release of the company’s third-quarter earnings, Disney Chairman Michael Eisner and Chief Financial Officer Thomas Staggs said they expected the theme parks to rebound when the economy picks up, adding that the company’s balance sheet remains strong despite Disney’s current troubles.

Despite Friday’s results, neither Disney nor Viacom is the worst stock performer among media giants this year. U.S.-traded shares of Paris-based Vivendi Universal are down 73% since the beginning of the year, and AOL Time Warner’s stock is off 68%. That compares with declines of 26% for Disney and 21% for Viacom.

AOL Time Warner and Vivendi also fell Friday on the NYSE. AOL Time Warner lost 71 cents, or 6.5%, to $10.30 ; Vivendi fell 70 cents, or 4.6%, to $14.45 .

Among other media giants, Australia-based News Corp.’s U.S.-traded shares fell 82 cents, or 4.2%, to $18.88 on the NYSE.

Hotel and cruise-ship stocks also were hit hard because Disney’s attendance bodes poorly for tourism overall. Hilton Hotels dropped 70 cents to $11.40 and Carnival Corp. slumped $1.76 to $23.94.

Among casino operators, Mandalay Resort Group slid $1.59 to $26.50 and Harrah’s Entertainment dropped $2.31 to $44.12.