Disney Profit Up; ABC Radio Deal Settled

Disneyland’s 50th-anniversary celebration helped boost Walt Disney Co.’s fiscal first-quarter profit by 7%, despite a sharp drop in its movie studio earnings.

Television operations and consumer products also made strong showings, the Burbank media giant said Monday, the same day it announced it would merge its ABC Radio stations with Citadel Broadcasting Corp.

Disney’s net income for the quarter ended Dec. 31 rose to $734 million, or 37 cents a share, from $686 million, or 33 cents, a year earlier. Not counting the gain from the sales of a cable television equity investment and a magazine business, the per-share profit of 35 cents still beats Wall Street’s expectations by a nickel. Sales of $8.85 billion were up 2%, also surpassing analysts’ consensus predictions.

“I am encouraged by the solid momentum in our earnings and the financial and creative strengths that underpin these results,” Disney Chief Executive Robert Iger said in a statement.

Chief Financial Officer Thomas Staggs said the first-quarter results reflected fundamental growth in the company’s businesses, adding that Disney remained on course to achieve double-digit earnings growth at least through 2008.

Disney announced its results after the market closed. Its shares rose to $25.47 in extended trading, after falling 5 cents to $24.96 in regular trading.

“Altogether, I think it’s very solid,” said Harold Vogel, an independent media analyst. “I don’t see anything that would make someone rush out and buy stock over what they had last night, but at the same time, there’s no reason why anyone should rush to sell it either.”

Disney’s parks and resorts business posted a profit of $375 million for the quarter, a 51% gain from a year earlier. The company’s California and Florida theme parks set a holiday season attendance record, Iger told analysts in a conference call.

“This was due to the strength of our industry-leading theme parks propelled by the ongoing excitement of our 50th-anniversary celebration,” he said.

The consumer products division, including video games, showed a 17% increase in profit, while media networks, including ABC and ESPN, gained 7%. As expected, the studio entertainment division’s profit dropped, sliding 60% to $128 million from a year earlier.

Despite strong box-office performances by “The Chronicles of Narnia: The Lion, the Witch and the Wardrobe” and “Chicken Little,” Disney’s slate overall fell short of the previous year’s offerings, which included such hits as “The Incredibles” and “National Treasure.”

Iger and some analysts predict that the studio will fare much better this year, largely because of the summer releases of “Pirates of the Caribbean: Dead Man’s Chest” and Pixar Animation Studio’s “Cars.”

Disney last month agreed to acquire Pixar for $7.4 billion in a move to resurrect its ailing animation business. In buying Pixar, Disney not only would get the computer animation pioneer responsible for a string of hits, such as “Finding Nemo,” but also its talent, including creative guru John Lasseter.

“We believe the combination with Pixar provides us with great promise for the future across, not just our studio business, but a number of our businesses,” Iger said. “Clearly it strengthens our asset portfolio.”

Media analyst Katherine Styponias of Prudential Equity Group rates the stock “overweight” and set a price target of $34 a share. But in a note to investors, she warned of potential risks, like terrorist threats, that could affect park attendance.

Also Monday, Disney announced that it had reached an agreement to merge ABC Radio -- which includes 22 stations and the ABC Radio network -- with Citadel Broadcasting of Las Vegas. For months Disney has considered selling its ABC Radio operation, which it does not believe is essential to its core businesses.

The cash-and-stock deal, valued at $2.7 billion, would result in the creation of a new company, Citadel Communications, which would be the third-largest radio group in the country, Disney said. If the merger is completed as planned, Disney shareholders would own 52% of the new company and Citadel shareholders 48%. Disney also would keep $1.4 billion to $1.65 billion in cash, based on Citadel’s share price when the deal closes.

Citadel shares rose 4 cents to $12 on Monday before the deal was announced.

The new company would be headed by Citadel CEO Farid Suleman, a former CEO of Infinity Broadcasting Corp.