Merrill Lynch upgrades Walt Disney Co. (DIS ) to buy from neutral.
Analyst Jessica Reif Cohen believes earnings per share (and share) momentum from Disney's multi-year recovery is poised to continue across its operating segments with visible operating leverage, diversified mix between advertising and subscription revenue, and ticket sales.
She raises her $1.23 fiscal 2005 (ending September) earnings per share estimate to $1.26, but believes there is an upside potential from progressive earnings per share acceleration through the year. She maintains her $1.50 fiscal 2006 earnings per share estimate.
Cohen says key operating drivers should include a recovery at theme parks, improved ratings at ABC, and sustained growth in cable (particularly ESPN). She sets a $35 target.