CLSA On Disney Results: Not Great But Not View-Changing

CLSA maintains its Outperform rating on Walt Disney Co (NYSE: DIS), while raising its target price by $12 to $115, saying that the second quarter results give less reason for business model concerns than the last three.

Although the drag from subscriber losses at cable nets moderated to 1 percent from 2 percent in the first quarter, rate increase was 6 percent versus 7 percent last quarter and Consumer Products (CP) results were "noisy/soft."

"Our O-PF thesis is based on expected earnings upside from the "creative" segments ie, film studio and CP; and ESPN performing within expectations. Although ESPN subscriber trend did get less bad, non IP-licensing businesses within CP as well as timing drove a soft quarter," analyst Vasily Karasyov wrote in a note.

Related Link: The Simple Bear Necessities: Disney Bears "Did Not Get What They Wanted" From Q1

"We currently expect a better CP performance in the remainder of FY16 helped by the film slate and high margin licensing revenue associated with it; we are modeling operating income growth of 13 percent in full FY16 in line with 1HFY16 increase," Karasyov added.

The analyst updated full FY16 Cable Networks' revenue and operating income estimates to $17.10 billion and $7.00 billion, respectively.

Disney reported a rare miss, with EPS coming in at 1.36 versus consensus estimates of $1.40 per share. Despite delivered double-digit growth in adjusted EPS for the 11th consecutive quarter, the second quarter marked the first time Disney had failed to meet analysts' expectations in over two years.

Shares of Disney were down 4.44 percent at $101.86 mid-afternoon Wednesday.