Coming soon: VAT, ECB and Walt Disney

Coming soon VAT, ECB and Walt Disney

VAT (TVA.B $8.90): low scores

CIBC World Markets reiterates a recommendation about “underperforming sector.”

In the first quarter, the company reported a loss of $0.43 per share ($0.30 more, according to some sources), compared to the expected a loss of $0.24.

Robert Bek said he expected modest results given a small advertising market and significant ongoing investments in the TV business. It states that this is exactly what happened with additional headwinds. He added that the company continues to subtract costs to adapt to a changing environment.

The analyst notes that TVA advertising revenues declined 5.8%. Income from subscriptions to specialty channels were up sharply (+ 8.2%), but the niche is still too small to offset losses in traditional activities.

Mr. Bek said he did not expect a positive change in market conditions. He believes that the process of finding a new CEO (Peter Dion becoming the boss of Quebecor) should likewise add pressure for a while.

The anticipation of earnings in 2014 is reduced from $0.70 to $0.29 per share, and, accordingly, in 2015 from $0.88 to $0.40.

The target was lowered from $10 to $9.

ECB ($48.50): 2015 remains a concern

TD Securities reiterated a recommendation to “hold”.

In the first quarter, the company reported a profit of $0.81 per share, compared to the expectations of $0.78 and consensus at $0.76.

Vince Valentini says the results are solid and he sees little reason that would cause investors to reflect on the value of the shares because of the quarterly results.

He adds that he also sees little difficulty for the year 2014, but be concerned for fiscal 2015.

The analyst notes that next year, the company will no longer benefit from the synergies of Astral. It now also benefits from the increase in rates for its specialty channels, but this contribution is expected to decline in 2015. Headwinds emerge further on some advertising revenue while TVA Sports and Sportsnet are going to receive even more spreading thanks to hockey content.

He believes that cash flow may be stable or decline next year, which will make it harder for ECB to maintain the momentum of dividend increases. However, if the dividend continues to grow, investors may question the profitability awarded by the shares, especially if interest rates start to rise.

Mr. Valentini believes that it would be more optimistic if the company could make a major acquisition in late 2014. For now, however, the direction indicates that acquisitions are not needed to increase the growth.

The anticipation of earnings in 2014 has risen from $3.17 to $3.19 per share. In 2015 it is reduced from $3.42 to $3.30. The 2016 is expected to see the fall of $3.44 to $3.40.

The dividend is $2.47 per share (5.1%).

The target is $48.

Walt Disney (DIS, US $81.03): Frozen increase prospects

BMO Capital Markets reiterates a recommendation to “outperform.”

In the second quarter, the company reported adjusted earnings of $1.11 per share, compared to the expectations of $0.96 within the company and consensus estimates of $0.95.

Daniel Salmon notes that revenues from all divisions (media, cable and studios) were above expectations. The performance was particularly interesting for the side studios. Operating income was up 302%, under the leadership of the Frozen animation film.

The analysts believe that the momentum of Frozen is expected to continue with the introduction of derivatives, which are a little late because of the unexpected success of the flick. They also added that other productions like Star Wars and Shanghai could also make significant contributions.

The anticipation of earnings in 2014 is raised from 4.11 to US $4.20 per share. Those for 2015 are maintained at US $4.65.

The target is US $90.

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