UPDATE 4-Disney shows all-around strength, profit surges

Tue Feb 8, 2011 6:46pm EST

* Fiscal Q1 EPS 68 cents vs Wall St. view 56 cents

* Rev up 10 pct to $10.7 bln vs Wall St. view of $10.5 bln

* ESPN, cable channels lead surging ad sales

* Shares rise 3.6 pct after hours (Adds quotes from CEO Iger)

By Paul Thomasch

NEW YORK, Feb 8 (Reuters) - Walt Disney Co (DIS.N) reported a better-than-expected 54 percent surge in profit, reflecting an improving economy that got consumers traveling to its theme parks and businesses buying up ad time on its TV networks.

Disney is the last of the entertainment powerhouses to report quarterly earnings, and its results on Tuesday stuck to the script written by News Corp (NWSA.O) and Time Warner Inc (TWX.N) -- chiefly, that a major recovery in advertising spending buoyed results.

(Interactive: Media companies r.reuters.com/kus77r)

Shares in Disney, which have gained nearly 10 percent this year on hopes for a broad ad recovery, jumped 3.6 percent to $42.65 from a close of $41.18 on the New York Stock Exchange. The world's largest media company by market value posted a 10 percent rise in revenue.

"They were very strong across the board," said Chris Marangi, an analyst with Gabelli & Co. "The television division was particularly strong, driven by the cable networks."

Disney's television business stole the show, due in large measure to the performance of the ESPN and its family of sports channels. Profit rose 47 percent at the division.

Prime-time ratings at sports network ESPN were up about 9 percent during the last three months of the year, thanks to Monday Night Football, college football bowl games, the National Basketball Association and its flagship "SportsCenter" program. The TV division also includes the ABC broadcast network and Disney Channel.

Chief Executive Bob Iger told analysts on a conference call that second-quarter ad sales at ESPN were pacing up double-digits, pointing to "gangbuster" demand from categories that included automotive, retail, and telecommunications.

"The sports advertising marketplace is extremely robust -- as is, by the way, the overall marketplace," he said.

Disney's two other biggest business divisions -- studio entertainment and parks and resorts -- also turned in higher operating profit for its fiscal first quarter.

Rigorous cost discipline and higher per-capita spending by resort visitors, among other factors, boosted margins and helped Disney beat Wall Street's targets on profits.

Calling the results "spectacular," Caris & Co analyst David Miller said the quarter underscores the advances in the economy over the last several months.

"Advertising is a leading indicator," he said. "But the beauty of the stock is they've also got this lagging business in the form of the parks division. Your 'average Joe' isn't going to make the reservation to go down to Orlando and drop $3,000 on a vacation until he feels confident about the future."

With more guests taking vacations at its resorts and spending more while they were there, its parks and resorts profit climbed 25 percent.

Executives said they were "very pleased" with park trends in the current quarter, saying room reservations are running about 3 percent above prior-year levels.

But they also cautioned that travelers were still shopping for value deals. "You still have an environment that, while less challenged than it was certainly a year ago, still has its challenges," Iger said.

Studio operating profit rose 54 percent and consumer products profit increased 28 percent. In its interactive division, the acquisition of social-gaming outfit Playdom resulted in a quarterly loss, though revenue jumped 58 percent.

Like News Corp and Time Warner, Disney's results blew past expectations [ID:nN02180792]. Overall, it earned $1.3 billion, or 68 cents per share. That was up from $844 million, or 44 cents a share, in the period a year ago.

Analysts had been looking for the entertainment giant to post earnings of 56 cents a share. Disney's revenue was up 10 percent at $10.72 billion, above analysts' average estimate of of $10.52 billion. (Reporting by Paul Thomasch; Editing by Gary Hill and Richard Chang)

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