Mickey Mouse decouples from the U.S. economy

Mickey Mouse decouples from the U.S. economy

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With the economy either on the sunny side of the street or a godforsaken mess, all eyes will fall this week on Disney, which is due to report fiscal second-quarter earnings after the stock market closes today.

As Goofy goes, so goes America — or so the media seem to think. Whenever the economy is throwing out mixed signals and the financial talking heads are running wild, many tend to look to Disney

 to settle the issue. As a result, we get headlines about how Disney determines all — like this one from Daily Finance: “Disney’s Earnings Signal Good News for the Economy.” Or admonitions, like this one from the Financial Times, to read Disney for “recessionary pressure.”

Got that? Whether it’s good or bad coming our way, Disney is an omen and portent for all.

Take that to the Burbank.

Actually, it is probably time to take a breath and reconsider what, if anything, the diversified, international, luck-of-the-hit-film-draw Disney says about the larger state of the economy. For its fiscal second quarter, Disney is expected to report 97 cents a share on revenues of $11.23 billion, according to Zacks, robust increases of 23% and 6%, respectively, compared with a year earlier.

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As a backdrop, you need to factor in last week, which, from a macro-economic perspective, could not have been more confounding. GDP was a total horror show, while job growth appeared to be scooting along nicely, at least on the surface.

To quote Macbeth, “so foul and fair a week of economic news I have not seen.”

That means the media are going to lean on Disney even more heavily, especially with few others reporting this week that can be seen as a proxy for America itself. There is Whole Foods

and Ralph Lauren
but they represent only the pretentious twerp sector of the economy. Pfizer

disappointed yesterday, but isn’t dependent on the economy anyway. And “as SolarCity

or Keurig Green Mountain
goes, so goes America,” just doesn’t have a ring to it.

It will be Disney, for better or worse. Actually: worse. For several reasons, it flouts good reason to see Disney as a tell for the entire American economy.

Film. One year’s “Wreck-It Ralph” bomb is another year’s “Frozen” hit. In Disney’s first quarter, which ended Dec. 28, the animated musical, which I refuse to see in silent protest of the song “Let It Go,” drove a 75% increase in operating income for the company’s movie division. Movies float on the tide of hunches, not economic waves.

International. From parks in Paris, Hong Kong and Japan to entertainment consumers all over the world, Disney business is, to say the least, hardly contained to America. The influences on its bottom line are quite a mosaic, and getting more so by the day. Its Shanghai theme park is due to open next year.

Performance in recessions. Even Disney’s parks — which, on the surface, seem the most economically sensitive of their myriad of endeavors — are hard to figure. At times during the past economic crisis, the parks, counterintuitively, do better for a time as people downgrade from fancier, international vacations.

Even its broadcast division, which threw off $1.28 billion in operating income during the first quarter, is hard to correlate directly to the economy. Sports viewing is relatively evergreeen, and ESPN is doing quite well, while ABC, a rusty old network in the Age of Netflix

will probably be troubled going forward under any economic circumstance.

Recent pattern. Disney has exceeded expectations in the past four quarters, so any strength probably says more about its condition than any short-term lurch in economic fortunes. Weakness might be a bit more telling but, even there, consensus estimates have risen from 94 cents in the past three months, which means that any moderate weakness cannot be viewed outside the context of the expectations game.

So what does it all mean? That’s an easy one. When Disney reports earnings and the media tell you the results say everything, just Let It Go.

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