Disney shares soar, following now familiar script

Wed Feb 9, 2011 5:06pm GMT

Quotes

   

* Shares, up 6 percent, among top gainers on NYSE

* Poised to reach 52-week high at close

* Brokerages raise price target after earnings

By Paul Thomasch

NEW YORK, Feb 9 (Reuters) - Walt Disney Co (DIS.N) shares rose 6 percent on Wednesday after its quarterly results put the icing on a banner earnings season for top U.S. media companies

-- all of them beneficiaries of a surging advertising market. -- all of them beneficiaries of a surging advertising market.

Disney's earnings prompted several brokerages, including Credit Suisse, Miller Tabak and UBS, to raise their price targets on the stock, which was among the top gainers on the New York Stock Exchange. The results, issued late Tuesday, showed profit up 54 percent and revenue up 10 percent.

"The earnings beat was broad-based and resolute as operating income surpassed estimates in all segments -- most notably at the cable networks and theme parks," Nomura analyst Michael Nathanson wrote in a report titled "The Mouse Crushes It."

"Having seen this movie before, we believe that Disney is positioned for future beats and potential stock upgrades," he added.

Investors and analysts had a similar reaction last week when two of Disney's competitors, News Corp (NWSA.O) and Time Warner Inc (TWX.N), posted stronger-than-expected results. Shares of both rose sharply following their earnings reports.

But Disney was the media sector's star on Wednesday, outperforming every other company in the industry by a long stretch. Analysts buzzed about the performance of its TV division, which includes sports network ESPN, Disney Chanel, and broadcast network ABC.

"Disney reported broad-based operating income upside to estimates in every major segment, but upside was most pronounced at the cable TV networks, where ESPN revenue upside drove operating margin expansion," said Barclays analyst Anthony DiClemente.

He noted that ESPN advertising is growing at the fastest rate in cable TV.

Prime-time ratings at ESPN were up sharply thanks to Monday Night Football, college football bowl games, the National Basketball Association and its flagship "SportsCenter" program. [ID:nN0883045]

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

Rounding out the quarter, Disney's studio entertainment and parks and resorts divisions also turned in higher operating profits.

Shares of Disney, which hosts an investor day next week, rose $2.43 to $43.62 in midday trade on the NYSE. That put it on track to hit a new 52-week high at the close.

(Editing by Steve Orlofsky)

((paul.thomasch@thomsonreuters.com; 1 646 223-6092; Reuters Messaging: paul.thomasch.reuters.com@reuters.com))

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