Market briefing --- Matt (medium)
Disney --- Su (fast)
>> welcome to “world financial report.” i am matt nesto. before we get to the federal reserve, let’s update you on the market today and earnings crossing after the close of trying on a tuesday. walt disney saying third-quarter profit was up 20%, beating analysts’ estimates by two cents a share. the nation’s second biggest media company says net income rose to $604 million, 29 cents a share, up from $502 million a year ago. disney shares rallied 2% ahead of the report and continue to move higher in extended trading. su keenan has been tracking those late-breaking numbers and has the story.
>> disney up six cents a share as we speak in extended hours trading. the key to the latest earnings report is the recovery of disney’s theme parks from a three-year slump due to concerns about the economy and terrorism. the walt disney company says higher attendance boosted theme park revenue 32%. chief executive michael eisner has been adding new attractions such as the tower of terror at the california park and mission space at the florida park. the company’s improving fundamentals have quieted calls from critics that eisner step down as c.e.o. five months ago, a shareholder revolt led the board to strip eisner of the chairman title. scott banesh says the theme parks are taking part in a huge cyclical recovery. operating net income at the theme parks rose 21%. revenue rose 32% to $2.29 billion. chicago asset management’s peter goldman says before the report that the gains are coming from a combination of higher attendance, price increases and cost cuts.
>> i think attendance trends have been very strong. they’ve marginally increased rates coming in, offered incentives in terms of packages to stay there for multiple days so i think things are going very, very well.
>> rising advertising and audience ratings at number-one rated sports network espn helped boost profit at disney’s cable networks division. operating income at the media networks division, including abc, rose 16%. revenue rose more than 8% to $2.92 billion.
>> you’re getting mid teens increases in the affiliate fees paid to them by the cable m.s.o.’s at the same time the ratings are doing well. if ratings go well, they can charge more per thousand viewers to the advertisers.
>> analysts say abc is still a challenge for disney and it has said that network will be profitable in fiscal 2005. the ratings have fallen since the 1994-1995 season when it was the most-watched network. that’s not the story now.
>> it’s such a diverse company. another big one with many ramifications will be cisco, world’s largest maker of computer americaing equipment. the company said it had its biggest quarterly sales gain in three years, 26%, up from a year ago. $5.93 billion in sales for the quarter. the gains were due, in part, to a boost in acquisitions and new industries such as internet securities. the profit was up 41% to almost $1.4 billion, working out to 20 cents a share. if you exclude the items, that was a penny better than expectations. shares have been down in extended trading as you can see, down 65 cents right now ahead of the report, up 2%. down about 15% year to date. also out, cisco will reinstate c.e.o. john chambers’ calorie, $-- salary, $350,000 a year, up from a symbolic $1 cash salary now we look at the fed and stocks surged after the fed said economic growth is set to accelerate. the dow and s&p both up 1.3%. the nasdaq, 1.9% higher here today. some of your broader indexes, a lot of green arrows as you can see. the best performer of those, the small caps, the russell 2000 up 2.2%. the federal reserve decision unanimously to raise interest rates by a quarter of a point was a multimarket-moving event. the benchmark lending rate now at 1.5%, the second rate increase this year. the fed policymakers reinstated their pledge to lift borrowing costs at a “measured pace” to keep inflation low without choking off growth. today’s statement noted that output growth has moderated in recent months while improvement in the labor market has slowed. members of the federal open market committee say they’re the reality is, the orange line is estimated g.d.p. for the year or running right now. lasting 4.8%. now we’re at 1.5%. so g.d.p., above the fed rate is a rarity. as you can see, the orange line only momentarily, a brief period of time, above it there. but in the past 30 years, really that is something we do not see very often. some would say it’s unsustainable that rates will go higher and the g.d.p. will slow. if you look at another one, inflation, again, we’re looking at about 20 years’ worth of data here. typically the orange line, the fed rate, will spend most of its time above the white line except for recently, you can see inflation, annualized core inflation without food and energy, still above the increased federal reserve rate. just a quick check. two-year, five-year and 10-year treasuries versus the increased yield on the fed funds target rate at 1.5%. a little blip on all of these as you can see. time for our exclusive bloomberg survey and i can sum it up for you. of 30 economists surveyed by bloomberg about what will happen at the september federal reserve meeting, the majority predict no rate increase. 25 out of 30 say no change. and .25% increase is forecast by five of them. that conviction is low among some of them. richard caser at national city corp. says it depends on the price of oil. if oil goes down, rates can go up. the economist with a.g. edwards says the jobs report will be the key. if growth in jobs and hiring returns, the fed may see clear to raise rates. those few that see rates going up a quarter of a point, they’re more confident. u.b.s. economist morrie harris and brian westbre say that the labor and the economy will rebound in the next few weeks and they are calling for a rate hike in september. how does the fed’s decision today affect the real economy? we’re talking about consumers and businesses and we’ll find out what diane swonk has to say about that, chief economist at bank one.
