NEW YORK (CNN/Money) -
The Walt Disney Co. Wednesday reported sales and profits for the latest quarter that easily topped forecasts on Wall Street.
The world's No. 2 media company posted net income of $537 million, or 26 cents a share, for its second fiscal quarter ended March 31, up 71 percent from $314 million, or 15 cents a share, a year earlier.
Including stock option expense, Disney said earnings were 23 cents a share. Analysts had forecast profits of 21 cents a share, according to First Call, which tracks earnings forecasts.
Sales grew 11 percent to about $7.2 billion from $6.5 billion, coming in ahead of the average forecast of $6.85 billion.
It was the second straight quarter of sharply improved results for Disney's embattled CEO Michael Eisner, who is still fighting off dissidents who want to oust him.
Investors liked what they heard, and Disney shares jumped about 2 percent in after-hours trading after ending the regular session little changed. The company reported after the market closed.
Eisner attributed the improved financials to a strengthening economy and his long-term growth strategy. He said the company was finally shaking off the "serious adverse effects" the slow economic recovery and the Sept. 11 terrorist attacks had on Disney.
"Now, as expected, we're seeing improvement," he said in a conference call with analysts.
Specifically, he pointed to a "solid resurgence" in theme park attendance both at home and abroad, rising global DVD sales, and strong results at Disney's cable operations. He said skyrocketing oil prices have not deterred theme park visitors.
Bear, Stearns analyst Raymond Lee Katz said he was pleased with Disney's performance. But he noted that the results were "helped along" by a one-time legal settlement and some accounting adjustments.
"Still," he said, "it was a good quarter." Katz said he does not own any Disney shares. His firm, however, was hired to advise the Disney board on Comcast's since-abandoned takeover bid.
Eisner was stripped of his post as chairman after a shareholder revolt at the annual meeting in March but retained the post of CEO.
Eisner reiterated during the Wednesday conference call that the question of his ongoing role at the company is up to Disney's directors, who he said indicated recently that they felt management was delivering results.
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That said, he added, the board continues to analyze "interior candidates" and others as appropriate "if and when I get hit by a truck."
The company also raised its outlook for the full year.
It said it expected earnings from continuing operations to rise 50 percent or more this year from the 65 cents a share reported last year. That would exclude the sale of the Disney Stores chain, it added. Previously it had seen a rise of more than 40 percent. But the revised guidance reflects what Wall Street had already been expecting.
Despite the strong quarter, challenges still loom for Disney.
Its ABC network, despite improvement, continues to lose money and viewers. The company's film studios, coming off a triumphant 2003, have recently released a trio of duds: "Hidalgo," "The Alamo," and "Home on the Range." And in January the animated film studio Pixar, home to hits like "Finding Nemo" and "Monsters Inc.," dumped Disney as its distributor.
There were also reports Wednesday that Disney is at odds with the heads of its lucrative Miramax studio, Bob and Harvey Weinstein. Tensions reportedly rose last week when it was disclosed that Disney was refusing to distribute Michael Moore's latest documentary, "9/11 Fahrenheit," which Miramax produced. News reports Wednesday said the Weinstein brothers may be looking for investors to finance a new studio.
The loss of the Weinsteins or Miramax, which produced about 40 percent of Disney's live-action features last year and an estimated $200 million in profit, would be a major blow for Eisner, especially after Disney's break with Pixar earlier this year.
Eisner did not offer details about the reported impasse with the Weinsteins during the call.
He did say that Disney considers Miramax a "very viable production company" that has made money for two of the last five years. Regarding the "Fahrenheit 9/11" dispute, Eisner says Moore has known for a year that Disney would not distribute the film. Disney, he said, has since offered to sell the film rights to the Weinstein brothers or to find a new distributor.
In its report, Disney said operating earnings jumped 76 percent at the company's networks, which include ABC, the Disney Channel, and ESPN, and 21 percent at its theme parks and resorts.
While revenues at its film studios rose 16 percent on strong DVD sales, operating income fell 26 percent to $153 million. Management attributed the drop to higher-film write-downs and higher marketing and distribution costs for two recent releases, including "The Alamo."
The strength in the theme park attendance has spilled over into the current quarter, CFO Tom Staggs said during the call.
President Bob Iger told analysts that the number of international visitors to Disney's domestic amusement parks jumped 20 percent in the quarter due to a more positive travel outlook, the strength of the euro, and the increase in nonstop international flights to Orlando.
Iger added that the company continues "to target reaching profitability" at the ABC network by next year. But he conceded that Disney erred by passing on a couple of reality TV shows that, in hindsight, were good bets. "Those aren't necessarily easily calls" to make, he said.
Overall, operating income at the company's TV and cable operations surged 76 percent in the quarter to $704 million. That jump was attributed largely to the company's cable operations, including its popular ESPN sports channel, and a onetime settlement in a bankruptcy proceeding involving DirecTV Latin America.
Staggs also noted that the company has significantly reduced debt and has $3 billion in cash on hand, more than half of which is earmarked for more debt payments. Eisner said the extra cash could be used for other purposes, including increase dividends and stock buy-back programs.
-- from staff and wire reports
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