Disney digging out

Quarter boosts stock, improves forecasts

Disney certainly achieved the result it sought from pushing out preliminary earnings several weeks ahead of schedule, alongside news that chairman-CEO Michael Eisner has a new helpmate to run the Mouse’s vast empire.

The stock jumped nearly 15% early Tuesday after Disney’s report that net income for the latest fiscal quarter solidly beat expectations, up 7% to $515 million. The shares settled to close up about 12% at $37.25, still a nice showing in a rocky market and well ahead of most of its peers. The stock was trading at $23 in November.

Iger aboard

Also on Monday, Disney appointed its international topper and ABC Group chairman Robert Iger president and chief operating officer.

The numbers, powered by a strong ad climate and the ABC network, are leading Wall Street to rethink its tepid financial forecasts for the company this year — despite the fact that Eisner and other Disney execs explicitly warned the Street not to make too much of a fuss over the strong quarter.

Operating income grew 8% to $1.1 billion, and revenue was up 5% to $6.8 billion.

While some still remain cautious, Goldman Sachs puts Disney on its “recommended list,” and Merrill Lynch’s Jessica Reif Cohen boosted her near-term rating on the stock to “accumulate” from “neutral.” Salomon Smith Barney’s Jill S. Krutick upped the stock to “buy,” and a handful of other Wall Street players boosted their fiscal 2000 earnings estimates for the company.

Outlook brightens

That’s the beauty of low expectations. When Disney reported dismal results for its latest fiscal year ended Sept. 30 — net income fell 30%, operating income 21%, while revenue was virtually unchanged — the company said earnings for this fiscal year would be about flat. Glum financial analysts prepared to sit back and wait a long while as the company slowly turned around its ailing consumer products and homevideo businesses — the areas that were dragging down earnings; they are still major trouble spots.

Disney’s chief financial officer, Thomas Staggs, cautioned that the ad environment, while strong now, isn’t especially predictable, and Eisner said he’s not revised his message to Wall Street. But with numbers like the ones reported this week, many on the Street are happy to do it for him.

“They do seem to be delivering on their commitment to shareholders,” one investor said.

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