Shares of Walt Disney (DIS) are on the rise despite the company reporting weaker than expected fourth quarter results, due in part to decreases at its ESPN and Disney Channel networks. The earnings release sparked two Wall Street analysts to move the stock to "Hold", though for Pivotal Research's Brian Wieser that was a downgrade and for Barclays' Kannan Venkateshwar it was an upgrade. Nonetheless, both noted that ESPN's challenges remain.

RESULTS: Disney reported fourth quarter adjusted earnings per share of $1.10 and revenue of $13.14B, which were both below consensus estimates of $1.16 and $13.52B, respectively. The company also said that Parks and Resorts revenue was up 1% for the quarter, while Consumer Products and Interactive Media revenue was down 17%. Further, Disney announced that fourth quarter Cable Networks revenue dropped 7% to $3.96B and operating income at Cable Networks was down $207M to $1.4B due to decreases at ESPN and the Disney Channels, partially offset by an increase at Freeform. "The decrease at ESPN reflected lower advertising and affiliate revenue and higher programming and production costs. Lower advertising revenue was primarily due to fewer impressions and lower rates. The decrease in impressions was driven by the Fiscal Period Impact, lower ratings and fewer units sold," the company said.

WEAK QUARTER AHEAD: In a post-earnings note, Pivotal Research analyst Brian Wieser downgraded Disney to Hold from Buy, citing the company's fourth quarter miss and the analyst's forecast for weaker than expected results in the quarter ahead. Wieser told investors that even accounting for the fact that Disney's fiscal calendar had one fewer week in this fourth quarter versus the year-ago period, the company's results showed more underlying softness than he expected in cable advertising, consumer products, the parks and the studio. He also lowered his price target on the shares to $102 from $108. Also bearish on Disney after its earnings release was his peer at Brean Capital. Analyst Alan Gould pointed out that when Disney misses Street's estimates, it tends to do so for a number of periods. Nonetheless, he noted that the shares have not been trading at their historical market premium due to the ESPN subscriber fears and long-term sports commitments, which could turn out to be an asset if ESPN subscribers are retained through skinny bundles or a direct-to-consumer offering. Gould maintained his Hold rating on the shares. 2017

STORY DE-RISKED: While opting to also stay on the sidelines, Barclays analyst Kannan Venkateshwar was more bullish on Disney's outlook after earnings. In a research note of his own, the analyst upgraded Disney to Equal Weight from Underweight, saying ESPN is "de-risked" going into 2017 after management quantified the impact of the new NBA contract. While the analyst continues to believe ESPN is secularly challenged and its affiliate growth underlines this fact, he believes the drag from this factor on the stock is likely to moderate given the increased visibility over the next year.

PRICE ACTION: In morning trading, shares of Disney have advanced about 3% to $97.65.