Disney profit up, but revenue disappoints

Walt Disney Co <DIS.N> reported a 12 percent rise in quarterly profit on Tuesday as strength in its television business and theme parks outweighed a sharp drop in profits at its film studio.

Earnings topped Wall Street expectations at Disney but revenue lagged analysts' targets, and share rose only 1.7 percent to $30.05 in after-hours trade.

In the second quarter, Disney saw its TV advertising rates and viewership soar on hit shows such as "Desperate Housewives" and "Lost."

Disney posted net income of $733 million, or 37 cents per share, compared with $657 million, or 31 cents per share a year ago.

Revenue rose to $8.03 billion, from $7.83 billion in last year's second quarter. Analysts, on average, expected net and adjusted earnings of 31 cents per share and revenue of $8.2 billion for the second quarter, according to Reuters Estimates.

"It's a killer upside surprise on the EPS line," said Sanders Morris Harris analyst David Miller, who had forecast earnings of 31 cents per share for the quarter. The media networks division results showed "an explosion" in growth, he added.

"It looks like the revenue line came up a little shorter than our models due to weakness in the studio," he said. "Consumer goods did much better than we thought. Parks and Resorts were in line with our models," he added.


In a conference call with analysts, Disney Chief Financial Officer Tom Staggs said the company expects its all-stock purchase of Pixar Animation Studios Inc. to dilute its fiscal 2006 earnings by 10 cents a share.

Staggs said the impact would be nearly equal in its fiscal third and fourth quarters.

But Staggs said the company looks forward to double-digit earnings growth in fiscal 2006 compared with one year ago even after the Pixar dilution.

Staggs also said a recent spike in gasoline prices was not expected to affect Disney's theme park business this summer, and that combined hotel room reservations were running higher than last year's third quarter at a rate of high single digits.

Media networks earnings rose 20 percent to $969 million, more than half total segment operating income. Parks income rose 17 percent to $214 million, while studio profit fell 39 percent to $147 million and consumer products income fell 8 percent to $104 million.

Disney last week completed its $8.1 billion acquisition of Pixar Animation Studios Inc <PIXR.O>, giving Apple Computer Inc <AAPL.O> Chief Executive Steve Jobs a 6.3 percent stake in the company and a seat on its board of directors.

Disney shares were trading at price-to-estimated 2007 earnings ratio of 17.8, compared with a price-to-earnings ratio of 16.5 for Time Warner Inc <TWX.N>, and of 17.3 for Viacom Inc <VIAb.N>.

Disney shares are trading at a 52-week high.


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