'John Carter': Despite Losses Its Impact on the Walt Disney Co. Likely Limited

| About: The Walt (DIS)

The Walt Disney Co. (NYSE:DIS) cautioned investors that when looking at the box office earnings of "John Carter," its film division would likely post a loss in the amount of approximately $200 million for Q2 2012. However, in spite of this cautionary warning, the Walt Disney Co should be relatively unaffected in its overall success this fiscal year based upon the performance of John Carter compared with its losses from the 2011 fiscal year "Mars Needs Moms."

Box Office Mojo reported that "Mars Needs Moms" cost $150 Million to produce but only grossed approximately $38.99 Million in both U.S. domestic box office sales and worldwide. Disney suffered a loss from this movie; however, the Walt Disney Co (pdf) did not even report this impairment or loss under its Business Segment - Studio Entertainment operating results and explanations as part of its FY 2011 explanation of earnings and/losses.

Box Office Mojo reported that "John Carter" earned $54,317,332 domestically and $126,100,000 internationally as of March 19, 2012. "John Carter" earned a total of $180,417,332 at the box office as of March 19, 2012. When comparing the estimated costs of production of $350 Million, as reported by the Associated Press, "John Carter" is currently operating at a loss of approximately $169,582,668 as ticket sales are split roughly in half with theater owners.

When comparing the potential loss of "John Carter" to the actual loss of "Mars needs Moms" as well as the resulting increase in free cash flow and earnings per share as ultimately reported in FY 2011 (the year "Mars Needs Moms" debuted), the Walt Disney Co should not be significantly impacted by the revenue loss of "John Carter" overall as the film is well visualized, has an exciting plot, and elements that appeal to children and adults.

Interestingly, and quite importantly, "John Carter" has earned 30.1% of its income through March 19, 2012, through domestic sales and 69.9% of its income through international sales as reported by Box Office Mojo. Box Office Mojo further reported that "John Carter" debuted fifth-highest in Russian box office history and is opening in China and Japan - the two biggest market in Asia.

Disney can still maximize earnings, whether by sequel, internationally or through a MMPORG, and earn more from "John Carter." The film is unlikely to impact earnings and/or profitability to any significant degree based on the returns the company received from "Mars Needs Moms" and its FY 2011 earnings results.

Later this year "The Avengers" and "Brave" will debut, and the author anticipates that these debuts will minimize the impact of "John Carter" on the Studio Entertainment segment of The Walt Disney Co. With "The Avengers," Disney begins to appreciate more fully its purchase of Marvel Comics.

Stated simply, Disney has not earned the revenue expected from "John Carter." However, when comparing the results to the overall profitability of The Walt Disney Co, just as in the losses from "Mars Needs Moms" in FY 2011, the losses from this film should not weigh on the stock price or overall profitability of the company.

Disclosure: I am long DIS.