Cheerful Trends From Walt Disney

Walt Disney Co. (NYSE:DIS) reported third-quarter results on Tuesday that served as another indication that advertising trends are improving along with the overall economy. Its other operating units are just as economically sensitive, which means investors stand to gain handsomely as Disney's sales and profit rise along with an increasingly favorable consumer climate.

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Third-Quarter Sales Review
Total revenue jumped 16% to $10 billion on double-digit growth in every division save for parks and resorts, which reported a modest 3% top-line increase as decent international trends were offset by decreases at the domestic theme parks and Disney Cruise Line. Studio entertainment saw the strongest growth and reported a 30% increase on the back of successful film releases, such as "Toy Story 3". Cable network revenue increased 28% and was the main driver for 19% growth in the media network segment on strong continued trends at the ESPN sports network.

Profit Recap
Total operating income improved 37% to $2.5 billion. Profits mirrored the revenue trends. Park and resort profits again lagged the other divisions, falling 8%. The consumer products unit posted $123 million in profits after a loss last year, demonstrating that while trends were strong this quarter, consistent profitability is difficult in the division as movies are unpredictable because it's difficult to guarantee a hit with every release. The next best division was again media networks as cable profits jumped 50% and broadcasting edged up 2%.

Net income increased 40% to $1.3 billion, or 67 cents per diluted share. This beat analyst expectations and mirrored robust growth at rivals including Viacom (NYSE:VIA) (NYSE:VIA.B) and Time Warner (NYSE:TWX), as an improving advertising environment and film hits drove the bottom line.

Outlook
Analysts expect full-year revenue to grow a more modest 4.9% to $38 billion and earnings of $2.04 per share, which would represent a year-over-year increase of approximately 12%.

Bottom Line
In terms of market cap, Disney is the largest entertainment firm out there. News Corp (Nasdaq:NWSA) and Time Warner stand at a very distant second and third respectively. In Disney's case, its business mix is especially leveraged to improving economic conditions given its exposure to advertising, theme parks, and other consumer products through its Disney Stores. As such, its fortunes will improve as long as the macroeconomic environment continues to brighten. (Find out the difference between mega-, large-, mid- and small-cap stocks. We show how each suits particular investing styles. Read Market Capitalization Defined.)

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