Earnings Preview: Will Disney Make Shareholders Happy?

Also during the second quarter, free cash flow experienced an excellent expansion. As a shareholder, I want to see that metric continue to rise.

Let's be honest, though: Disney has its problems. And it's mostly on the content side, in my opinion. Sure, the company produces a lot of compelling movies and television programming, but is it generating the kinds of returns needed to put the shares on an upward trajectory?

Although the company's focus often seems to be on the theme-park assets (which is understandable, since they are the important core of the business), shareholders must remember that CEO Bob Iger has made some big bets on acquisitions. Pixar has yet to satisfactorily supply a boost to the stock (or the dividend, for that matter). The Marvel purchase is still young, so I guess the jury hasn't convened on that one yet. Iger has also engaged sizable investments in video games and online properties; most recently, he made a deal with Playdom (I think this was a terrible move; why spend a significant amount of money on something that may not be relevant years from now, considering the fickle nature of the online public?).

Here's what I'm hoping for: analysts hammering away at Iger on his celluloid strategy. Toy Story 3 and Iron Man 2 were hits; Prince of Persia: The Sands of Time and The Sorcerer's Apprentice didn't live up to expectations. Why the disparity? Should management simply let Marvel and Pixar make all its films? What is the company doing to mitigate its risk to expensive budgets? Are execs saying no to unreasonable compensation demands from talent?

And what about distribution plans? As we all know, Alice in Wonderland was famous for its relatively quick release to DVD. You know what? I didn't think it was quick enough. Now that, according to Box Office Mojo, Toy Story 3 is on the verge of reaching $400 million at domestic theaters, should Iger order the movie to the home-video market over the Labor Day Weekend? If not, why not? I believe this latter question is of particular importance. As distribution schemes evolve, the concept of fast moves to ancillary channels has taken on added urgency. Shareholders deserve to know why Toy Story 3 shouldn't be out by Labor Day.

Disney's one-year stock performance has disappointed me. I want to see the shares break through the 52-week high of $37.98. I doubt the upcoming earnings report will help out in this regard, but I'm hoping the conference call yields some insight into the company's ongoing effort to finally set its studio division on a course of growth that will please Wall Street and make the equity a bigger favorite of institutional participants.

Disclosure: I own Disney; positions can change without notice.