Disney’s Outlook Remains Sunny

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The Walt Disney Co. spent a day and a half with analysts and investors at Walt Disney World last week, attempting to convince them things can only get better for the company.

It wasn’t such a tough sell, given that Disney has drastically turned around its fortunes in the past year — with double-digit earnings growth predicted for the next five years — powered by gains at the cable networks and theme parks and the rejuvenation of the ABC Television Network.

Also helpful: a strong performance in the fiscal first quarter.

Earnings, at $723 million, were up 5% in the period to 35 cents per share — besting the analyst consensus estimate of 29 cents per share — on 1% revenue growth.

Operating income, at $1.29 billion compared to $1.27 billion in fiscal 2004, also was up 1% in the period.


Media Networks, which includes the cable and broadcast networks, reported revenue growth of 11% and operating income growth of 36%.

Most of that increase came from the cable networks, such as ESPN and Disney Channel.

At the cable networks, revenue rose 16% to $1.8 billion and operating income was up 67% to $327 million, thanks to affiliate and advertising revenue increases at ESPN and advertising revenue increases at ABC Family.

Broadcast revenue rose 6%, to $1.65 billion, and operating income declined 5%, to $140 million.

In a conference call with analysts, Disney chief financial officer Thomas Staggs blamed the decrease in operating income at ABC television on increased costs at ABC News from presidential-election coverage.

ABC did not reap the benefits of its two biggest hits — Desperate Housewives and Lost — in the fiscal first quarter, because it sold advertising for the shows last year at lower prices based on previously low ratings.

Staggs said ABC should begin to reap higher advertising rates later in the year and is on track to becoming profitable.


Disney chairman George Mitchell told the audience last Tuesday that the board of directors will hold fast to its plan to select a new CEO by June.

Last year, Disney CEO Michael Eisner said he would step down after his contract expires in September 2006. Whether he stays on after this June to assist in the transition for a new CEO is still unclear.

Mitchell also appeared to deflect notions that current president and chief operating officer Bob Iger is a shoo-in to be CEO.

Iger is said to be the sole internal candidate for the position, but Mitchell said that there are no favorites.

“We approach this decision in good faith, with open minds,” Mitchell said.