UPDATE 3-Disney profit beats Street, no sign economy hurts

(Recasts first paragraph, adds details from conference call, analyst comments, share price)

By Gina Keating

LOS ANGELES, Feb 5 (Reuters) - Walt Disney Co's (DIS.N) quarterly profit topped Wall Street targets as Disney World set attendance records and its TV and consumer businesses grew despite a turbulent U.S. economy, while executives said they were "pretty optimistic."

Disney shares rose 5.5 percent in after-hours trade on the first-quarter results and the company's outlook for more growth in parks and media networks -- its top two earners. The stock's rise more than offset a 2.7 percent drop in regular trade.

Nor did the Hollywood writers' strike, which started a month into the quarter and appears to be on the verge of ending, hurt results, Chief Executive Bob Iger said.

Wall Street had been anxiously watching for signs that the slowing U.S. economy had led to weakened advance bookings at Disney's domestic resorts, which some consider a bellwether of consumer confidence.

Instead, Disney saw double benefits from a weak dollar, which has kept Americans vacationing at home while also drawing in more international tourists.

A strong ad market and tight supply pushed sales significantly ahead of last year's levels despite lower TV ratings, and are helping maintain growth, Chief Financial Officer Tom Staggs said.

"The pace of business to us looks pretty good," Staggs told analysts on a conference call. "We feel like we've got the ability to respond if necessary. But right now we're feeling pretty optimistic about where things go from here."

'BETTER PREPARED'

Net profit dropped to $1.25 billion, or 63 cents per share, from $1.7 billion, or 79 cents per share, in the year-earlier quarter, which had been boosted by the sale of interests in Us Weekly and E! Entertainment. Revenue rose 9 percent to $10.5 billion.

The 63 cents per share earnings topped Wall Street's average target of 52 cents, according to Reuters Estimates.

Pali Research analyst Rich Greenfield said the results showed just show how "well diversified" Disney is.

"I think that it truly sounds like they are better prepared ... to deal with an economic downturn than they were during the last recession," said Greenfield, who has a buy rating on Disney and owns no shares.

SMH Capital analyst David Miller, who also has a buy rating and owns no shares, said it was "tough to find a flaw in this earnings release ... it's one of the best I've seen."

Spooked consumers kept buying Disney-licensed video games and merchandise, especially for "Hannah Montana" and "High School Musical", propelling the consumer products division to 29 percent revenue growth in the quarter.

The company's movie studios, which released "National Treasure: Book of Secrets" and "Enchanted" in the quarter, saw flat revenue and a 15 percent drop in operating income from tough comparisons to last year's DVD sales of "Cars", "Pirates of the Caribbean: Dead Man's Chest" and "Little Mermaid."

Disney also said its animated "Toy Story 3" would hit theaters in 2010.

Media networks operating profit rose 28 percent to $908 million, with cable-based sports network ESPN and DVD sales of the Disney Channel's "High School Musical 2" and higher prime-time ad rates at the ABC network driving segment growth.

Staggs said fiscal second-quarter ad rates were tracking at double-digit percentage rates ahead of last year and sales at Disney TV stations were ahead of last year by mid-single-digit percentages.

PARKS 'MODESTLY AHEAD' OF LAST YEAR

Profit at Disney's parks and resorts business, which also includes cruise ships and vacation properties, rose 25 percent to $505 million. The parks results were helped by record holiday attendance and higher consumer spending at Walt Disney World in Florida, strong attendance at Disneyland Paris and improved attendance at Hong Kong Disneyland.

Staggs said domestic and international bookings so far were running "modestly ahead of last year."

As a result of its strong earnings statement and cash flow, the company plans more share buybacks and has repurchased $1.5 billion of its shares so far this year, Staggs said.

Disney shares had been trading at a ratio of 13.2 times estimated fiscal 2009 earnings, versus 14.2 times earnings for Time Warner Inc (TWX.N) and 13.5 for News Corp NWSa.N.

Disney shares in after hours trade rose to $31.71 from a close of $30.07 on the New York Stock Exchange, where the stock had dropped 83 cents, or 2.7 percent, for the day. (Additional reporting by Kristina Cooke and Sue Zeidler) (Editing by Braden Reddall)