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		The Disneyland Report > Disney News > Walt Disney Company ready for more growth in 2005 Disney News Walt Disney Company ready for more growth in 2005 By Mark Cotton, CBS.MarketWatch.com NEW YORK - Shares of The Walt Disney Company rose Friday after Merrill Lynch upgraded the media and entertainment group, saying 2005 earnings will get a boost from a recovery in its theme parks division, improved ratings at its ABC television network and sustained growth in its cable operations. Analyst Jessica Reif Cohen said the company could also benefit from a new distribution deal with Pixar and a push into the video game business with the acquisition of a video game developer. Disney shares closed up 55 cents, or 2 percent, at $28.30. Cohen lifted her rating on Disney to "buy" from "neutral" and established a $35 12-month price objective. The analyst raised her 2005 earnings estimate by 3 cents to $1.26 per share. The current Thomson First Call average estimate is for earnings of $1.24 a share. Theme parks to continue to recover Looking at the individual performance of each of Disney's businesses, Cohen said its ailing theme parks division should continue to recover in 2005. The analyst said theme parks historically take around four years to bounce back to prior operating income peaks from traumatic events such as the terrorist attacks of September 11, 2001. A rise in the number of international visitors due to the weaker U.S. dollar will drive the overall improvement in theme park attendance, according to Cohen. At the moment, foreign visitors make up around 17 percent of total attendance, but this should rise to prior peak levels of 25 percent. An 18-month global marketing campaign to promote the 50th anniversary of Disneyland should further increase the number of visitors to its parks, said Cohen. Other positive developments include a new pricing plan intended to increase per capita spending as well as length of stay at the parks, and improving consumer confidence. Cohen said progress toward sorting out the troubled finances of the company's EuroDisney theme park, based in Paris, France, and the opening of Hong Kong Disneyland in September 2005 were further tangible signs of a recovery in the division. ABC ratings recovery Elsewhere, Cohen lifted her 2005 operating profit forecast for Disney's ABC television network on a revival in its ratings led by the success of its series Desperate Housewives. The analyst now expects ABC to post an operating profit of $50 million, compared with a prior forecast that the network would break even. Cohen estimates that the success of Desperate Housewives, if maintained, could lift Disney earnings by nearly 2 cents a share in 2005 on the back of increased advertising rates for the show. On the cable front, an increase in the fees paid by cable companies to carry sports channels ESPN and ESPN2 will provide a further boost to earnings. Advertising revenue at the two channels has also grown by 20 percent on a continual ratings improvement. Moving from the small screen to the big screen, Cohen sees a 90 percent chance of Disney renewing its partnership with animation studio Pixar. "We expect Pixar to make a final decision regarding its next distribution partner only after Disney announces who its next CEO will be by June," said Cohen. Current Chief Executive Officer Michael Eisner will remain in his post until 2006. The analyst however said any deal will be on much more favorable terms for Pixar. Even if they fail to reach agreement, Pixar will retain a relationship with Disney as its seven feature films, including the recent "Cars" are co-owned and sequel rights are controlled by Disney, said Cohen. Disney can also expect to benefit from the success of two blockbuster movie hits in 2004, "The Incredibles" and "National Treasure." Meanwhile, the sale of its loss-making Disney Stores to The Children's Place should boost the bottom line at its consumer products division. Return to Disney News.




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