Merrill Upgrades Disney

Analyst Jessica Reif Cohen says improved ratings at ABC and grwoth in cable will allow the entertainment company to continue its earnings momentum

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.

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