The U.S.'s largest entertainment companies are expected to have higher fourth-quarter cash flow, buoyed by box-office successes such as "First Wives Club" and gains in cable programming.
Cash flow at Time Warner Inc., Walt Disney Co. and Viacom Inc. will rise by double digits in the quarter, analysts said. Cash flow, a measure of financial performance for debt-heavy companies, is earnings before interest, taxes, depreciation and amortization.
One of the biggest gainers will be New York-based Viacom, whose cash flow is expected to rise 25 percent to $554 million from $444 million, benefiting from the success of "First Wives Club" and "Star Trek: First Contact," two analysts said.
"The big driver [for Viacom] in the fourth quarter should be feature films and continued growth of the MTV network," said Alan Gould, an analyst at Oppenheimer & Co.
Gould expects Viacom to report profit from operations of 5 cents a share, compared with a loss of 3 cents in the corresponding 1996 quarter, which included a charge for films and weak video results. The company may report charges for moving Blockbuster Entertainment's headquarters to Texas from Florida and the closing of some music stores, said analyst Ed Hatch at UBS Securities.
Blockbuster, which operates stores that sell movie videos and music, is adding to Viacom's results with a 5 percent increase in sales at stores open at least a year, said Rita Zanella, an analyst at Gruntal & Co. Same-store sales is a key barometer of a retailer's sales growth.
Disney is expected to report cash flow of $1.6 billion for its fiscal first quarter, up 11 percent from $1.44 billion a year earlier, Gould said. The company is expected to report earnings of 95 cents a share, up from 93 cents a year ago, based on the average estimate of 13 analysts surveyed by IBES International Inc. "The big story is going to be the merchandising" related to the box-office success of "101 Dalmatians" and the "Toy Story" video release, Gould said.
Video sales are expected to decline a bit in the quarter as "Toy Story" competes with strong sales last year when two videos, including "The Client," were released.
At ABC, operating income will likely rise because of accounting changes related to the acquisition of Capital Cities/ABC Inc. Still, the network continues to be hurt by declining ratings, which means advertisers may be willing to pay less to air their ads on the network.
Cash flow at Time Warner will rise to about $1.35 billion from $1.15 billion, including results from Turner Broadcasting System Inc. and Time Warner Entertainment. Gould said. Time Warner, which owns Warner Bros., Home Box Office and Time Inc., is benefiting from improvements in its cable-TV operations. The cable business got a boost from a 2 percent to 3 percent rise in subscribers, analysts said.
Pub date: 01/19/97
