Disney profit up on studio, revs short of Wall St

By Gina Keating

LOS ANGELES (Reuters) - Walt Disney Co. (DIS.N) on Tuesday posted a net profit ahead of Wall Street targets thanks to strong performances from ESPN and movies like "Wild Hogs," but revenue lagged estimates and its shares fell 2 percent.

Lower costs at the studio, which cut jobs last summer and produced fewer films, and television network ABC, which had the expensive-to-produce Super Bowl last year, helped the results.

Disney reported a net profit of $931 million, or 44 cents per share, compared with $733 million, or 37 cents per share, in last year's second quarter. Revenue rose to $8.07 billion from $8.03 billion a year ago.

Analysts, on average, had expected net earnings of 36 cents per share and revenue of $8.1 billion, according to Reuters Estimates.

Sanders Morris Harris analyst David Miller said the No. 3 U.S. entertainment company appeared to make up for the flat revenue at the operating income level by containing costs, particularly in movie making.

"The studio was flush, especially since they didn't have a lot of product in the March quarter," Miller said. "For the media networks, the operating income was outstanding."

Swing factors for the studio this quarter include the box office performances of "Pirates of the Caribbean: At World's End" and "Ratatouille."

Profit rose in all four Disney divisions last quarter.

Studio revenue was down 13 percent from last year, when the company had more theatrical releases and benefited from the international theatrical releases of "The Chronicles of Narnia: The Lion, the Witch and the Wardrobe" and "Chicken Little."

But operating profit at the division improved by 60 percent as moderately budgeted films like middle-aged motorbike comedy "Wild Hogs" and fantasy adventure "Bridge to Terabithia" did well at worldwide box offices.

Revenues for Media, the largest contributor to Disney operating income, were flat in the quarter from last year's second quarter, when the ABC network benefited from advertising revenue from the Super Bowl and some college football games.

Yet with costs also down due to the absence of all the football, and growth at sports network ESPN and international Disney Channels, segment operating income grew 21 percent.

ABC benefited from higher prices for spot advertising, which helped overcome the effect of lower ratings. Prices for spot ad sales are running double-digit percentages ahead of last year's third quarter, Chief Financial Officer Tom Staggs said.

Disney Chief Executive Bob Iger told analysts the current television advertising market looks strong, which should contribute to successful upfront sales later this month.

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