NEW YORK (CNN/Money) -
With Walt Disney's annual shareholder meeting underway at its Florida theme parks, Thomas Skaggs began an analysis of the company's latest earnings report Monday by making a joke.
"It's been just short of a year since our last meeting here and, well, pretty much nothing has happened since then," said Skaggs, the company's chief financial officer.
As Skaggs himself quickly noted, the last year has been anything but routine for the Mouse House.
A year ago Disney (Research) was in turmoil, both financially and in the public's eye. Comcast launched a hostile bid. Pixar Animation Studios cut off contract renewal talks. Michael Eisner gave up the chairman's job in the face of a shareholder vote and, six months later, announced he would step down as CEO in 2006.
On its own roller coaster ride, Disney stock hit a 52-week low in August.
Through it all, however, Disney was posting solid gains from a rebounding domestic theme park business, its hugely successful ESPN sports cable network, and a movie studio that, despite its share of box office duds in 2005, was still reaping the benefits of a blockbuster 2003 marked by "Finding Nemo" and "Pirates of the Caribbean."
As Monday's first quarter earnings show, Disney's balance sheet still looks strong. Despite some tough year-over-year comparisons, the Burbank, Calif. company reported five percent growth in net income, to $723 million, and a one percent increase, to $8.7 billion in sales.
The results, once again driven ESPN and theme parks exceeded Wall Street estimates. Movie studio performance, which reported a 20 percent drop in revenues, wasn't as bad as some analysts had expected. The performance was helped by the blowout success of "The Incredibles," the latest computer animation developed with Pixar, and the surprise hit "National Treasure."
The ABC network, which is in the midst of a ratings turnaround, isn't contributing yet to the company's bottom line. Still, Disney executives are predicting that ABC will return to profitability this year.
All in all, it wasn't a spectacular quarter for Disney. The company's stock was up barely half a percent in after-hours trading.
In fact, Disney has become the darling of a resurgent media industry. Its stock is up nearly 23 percent in the last six months, followed by close to 11 percent for Viacom, 9 percent for Time Warner and 3 percent for News Corp.
Last week, Disney stock hit a 52-week high of $28.94 a share.
"We believe the stock could be the best performer in the group in 2005," William Drewry, an analyst with Credit Suisse First Boston, wrote Monday in a research report to investors. He cited strong fundamentals, an improving balance sheet and the anticipation of the naming of a new CEO to replace Eisner.
A clean balance sheet, messy public relations
On that last point -- bringing an end to years of turmoil in the executive suite -- Disney still has a ways to go.
The company's dirty laundry has been aired for months now in a Delaware courthouse where a group of shareholders are seeking the return of a $140 million pay package given to former president Michael Ovitz when he was fired in 1996. The court testimony hasn't painted Disney officials, Eisner in particular, in a flattering light.
Adding to the public relations nightmare, Disney is now embroiled in a fight over an upcoming book about the company and its mercurial CEO. Disney, according to published reports, is trying to pressure the publishers of James Stewart's "Disney War" to cut potentially damaging passages before the book's March release.
One person with arguably the most to lose from all the public sniping is Robert Iger, Disney's president and the sole internal candidate for Eisner's job. Even though Eisner publicly backs Iger, some analysts think Iger would do well to distance himself from his boss.
Among the other candidates rumored for the CEO job are Peter Chernin, the outspoken president of News Corp (Research). and its Fox Entertainment unit, and Jeffrey Bewkes, chairman of Time Warner's entertainment and networks group. Time Warner (Research) owns CNN/Money.
Dennis McAlpine, an independent research analyst, thinks that Disney's financial strength helps Iger's candidacy far more than the company's public relations woes hurt it.
"I think Iger is moving into the lead," said McAlpine. "The choice is going to depend a lot on the availability of other people, particularly Peter Chernin and Jeffrey Bewkes, and whether Iger can distance himself from Eisner."
Time is running out. Disney directors have pledged to name a new CEO by June.