Disney's Mindful Moves

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Mickey Mouse is flashing that wide signature smile again now that Disney (NYSE: DIS) continues to crawl out of the slump that made the stock a compelling takeover target and had its chieftain nervously eyeing the chopping block.

The entertainment giant saw its fiscal third-quarter profits rise by 21% to $0.29 a share on a 17% spike in revenues. With theme park attendance improving and ESPN a bulwark sporting 10 consecutive quarters of subscriber growth, weaknesses at ABC and the multiplex box office were easily overcome.

The company has earned $0.88 a share through the first nine months of its fiscal year. That's refreshing relative to last year's showing -- and the year before that -- but it's only a marginal improvement on the $0.85 a share that Disney earned three years ago during the same period.

However, Disney is targeting double-digit growth through at least 2007, hitting record operating profits again by fiscal 2005. The company also continues to pay down its debt, paving the way for share buybacks and a likely dividend hike. That should keep the lynch mob away.

Yet Disney continues to leave many spectators scratching their chins. It continues to hold off ordering its third cruise ship, despite the fact that bookings are running 30% ahead of last year and the Disney Cruise division's 25% in operating margins are as tempting as the upbeat outlook by rival fleets like Carnival (NYSE: CCL) and Royal Caribbean (NYSE: RCL).

In commenting on its intention to produce sequels on the characters it owns from Pixar (Nasdaq: PIXR) -- with or without Pixar's blessing -- CEO Michael Eisner singled out the success of Toy Story 2 and Shrek 2. It's not very comforting for a company that has produced countless animated sequels to have to rely on the work of rival studios to prove a point.

In sum, it's refreshing to have to reach to poke holes in Disney's boat right now. Yes, ABC is struggling with profitability, and attendance at the California theme parks has been running sluggish since the quarter ended, but with so many parts in the Disney machine, you never expect to have them all coasting along. The company is putting out more good news than bad, and that's probably the clearest indication that a turnaround is afoot.

What did you think of Disney's report? Are you distressed to find out that ABC will need a smashing new season to achieve profitability? Should the company go ahead and flesh out its cruise ship fleet? All this and more in the Disney discussion board. Only on Fool.com.

Longtime Fool contributor Rick Munarriz owns shares in Disney and Motley Fool Stock Advisor recommendation Pixar.