Nomura Still Buying Disney Despite Earnings Miss

Nomura maintained its Buy rating and $115 target price on Walt Disney Co (NYSE: DIS) despite the company reporting a rare miss in its quarterly earnings.

Disney's second-quarter EPS came in at 1.36 versus consensus estimates of $1.40 per share. Despite delivering 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. Revenue in the second quarter stood at $2.1 billion.

Related Link: What Segment Should Disney Investors Be Worried About?

"Disney reported a modest miss relative to Street estimates, primarily on declines in the Consumer Products division, as the tough 'Frozen' compare weighed more heavily on retail than on licensing growth," analyst Anthony DiClemente wrote in a note.

"[W]ithout the benefit from 'Star Wars Battlefront' last quarter, the YoY comparison to 'Frozen' became much tougher in F3Q16," he added.

On the media side, cable networks affiliate fee and operating income guidance was reaffirmed, with recurring affiliate fee and ad growth in line with expectations.

"Our view is that Cable is stable, Studio continues produce profitable/strategically valuable IP, and the Shanghai Park opening could represent a step-function in Disney's long-term Parks OI growth given the improved visibility in China," DiClemente noted.

However, the analyst cut his FY16 EPS estimate to $5.78 from $5.85 and FY17 estimate to $6.10 from $6.17. Street expects earnings of $5.85 a share for this year and $6.25 for FY17.

Shares of Disney were down 4 percent at $102.29.