Disney Beats Expectations, Sees Double-Digit Growth

Walt Disney Co. (DIS) posted an unexpected rise in quarterly earnings on Monday as strength at cable juggernaut ESPN and theme parks more than made up for slower DVD sales.

Net income rose 5 percent to $723 million or 35 cents a share in the fiscal first quarter ended December 31 from $688 million or 33 cents a share a year earlier.

Revenue rose 1 percent to $8.7 billion from $8.5 billion.

Sports channel ESPN (search) led the way for the media division, as it has in the past. ESPN also had planned to defer some revenue due to contract changes but recognized more than expected in a boost for the quarter.

Cable network ABC Family (search) had higher advertising revenue and broadcast network ABC, which trailed all main rivals last year, turned around with hits like "Desperate Housewives" and "Lost." Disney sold much of the December-quarter ads before the shows proved so popular, so it did not get a big boost from ABC advertising in the quarter.

International visitors to Florida's Walt Disney World (search) increased, but not dramatically, despite the weak U.S. dollar. Disney said current quarter bookings were up.

"Some people are more reluctant to get on a plane to come to America," Harris Nesbitt analyst Jeff Logsdon said. He called the quarter "great."

"The theme parks did better than we expected and better than anybody else expected. The studio numbers are a little better than our numbers," Logsdon said.

The earnings included a net 1-cent-per-share benefit from tax matters and restructuring and a 1-cent benefit from a change in the calendar. Excluding those items, the results topped Wall Street expectations of 29 cents a share, according to Reuters Estimates.

Shares rose less than 1 percent in after-hours trade.

"It's a very nice upside surprise," said analyst David Miller of Sanders Morris Harris, who had predicted Disney would not disappoint analysts on its home turf. Monday was the first day of a meeting with analysts in Florida.

Disney confirmed that it still sees double-digit earnings growth this fiscal year and through at least 2007.

In the December quarter, operating income at media networks rose 36 percent to $467 million and parks profit rose 11 percent to $258 million. Consumer products income dropped 3 percent to $231 million.

Movie studio profit dropped 27 percent to $333 million as Disney's home video slate paled in comparison to the previous year's "Pirates of the Caribbean" and "Finding Nemo," by partner Pixar Animation Studios Inc.

Chief Financial Officer Tom Staggs said the company would buy more shares in the current quarter and did not intend to cut debt, meaning it will refinance maturing issues.

Shares rose to $28.80 in after-hours trading on the Inet electronic brokerage from a close of $28.63 on the New York Stock Exchange.