Disney beats Wall Street; movies, parks strong

By Gina Keating

LOS ANGELES (Reuters) - Walt Disney Co posted a better-than-expected 22 percent rise in profit as its movie studio scored hits with "National Treasure: Book of Secrets" and "Enchanted" and a weak U.S. economy failed to dampen theme park attendance.

Disney's media networks also saw a double-digit rise in second-quarter operating income due mainly to affiliate and ad rate increases and subscriber growth at sports channel ESPN.

Broadcasting shook off a Hollywood writers' strike that ended halfway through the quarter to post a 17 percent rise in operating income, propelled by international sales of ABC Studios scripted shows like "Lost" and "Gray's Anatomy."

Disney joined other major U.S. media companies in outperforming expectations in the quarter, and investors rewarded the outsized results on Tuesday by boosting Disney shares by 1.6 percent in after-hours trade.

"If you didn't know that the consumer was under tremendous pressure you would think we were in a boom if you looked at their results," said Larry Haverty, associate portfolio manager at Gabelli Global Multimedia Trust.

"All of the big media companies are doing fundamentally very well and the market just refuses to acknowledge it," Haverty added.

'FANTASTIC QUARTER'

Net income in the fiscal second quarter ended March 29 was $1.1 billion, or 58 cents per share, compared with $931 million, or 44 cents per share, in the same quarter last year.

Revenue rose nearly 10 percent to $8.7 billion.

Analysts, on average, had expected earnings of 50 cents per share and revenue of $8.5 billion, according to Reuters Estimates.

"It was a fantastic quarter. Not only are theme parks doing better ... but the vast majority of the company aside from theme parks exceeded investors' expectations, particularly the media networks," said Rich Greenfield, analyst with Pali Research.

Disney also cheered investors by predicting that its theme parks -- seen by some as a bellwether of consumer spending because of the need to plan vacations -- would stay "resilient" despite rising gasoline prices and air fares.

Domestic room reservations for the rest of fiscal 2008 were trending slightly ahead of last year, though the third quarter faces a tough comparison versus last year, which had included the Easter holiday, Chief Financial Officer Tom Staggs said.

"We believe we are much better positioned in a difficult economic cycle than we were in the past," Chief Executive Bob Iger said on a conference call with analysts. "We believe this segment can sustain success for many years to come."

Staggs said its ABC television network was seeing "healthy" double-digit growth in spot ad sales in the third quarter.