Kung Fu Panda 2 Grosses Less Than Analysts Hoped for DreamWorks

According to analyst Michael Pachter at Wedbush Morgan, Kung Fu Panda 2 (NASDAQ:DWA) generated an estimated $60 million (final results on Tuesday) for the Thursday-Monday period at the domestic box office over the five-day weekend, compared with our estimate of $75 million. Through Sunday, the film had grossed $53.8 million, compared with the first KFP film’s $60.2 million debut. It opened at  3,925 theaters, fewer than most DreamWorks releases, due to Pirates of the Caribbean: On Stranger Tides (NYSE:DIS) (4,164 theaters according to www.boxofficemojo.com) and The Hangover Part II (3,615) (NYSE:TWX). International box office is $57 million, with most openings in June.

We believe multiple factors will lead to Kung Fu Panda 2 (NASDAQ:DWA) having a long run at the box office. Unlike the disappointing Megamind (which grossed $321 million worldwide), Kung Fu Panda 2 is a sequel to a highly-successful 2008 release ($632 million before ticket price inflation). Reviews for Kung Fu Panda 2 (Metacritic score of 68) have been DreamWorks’ strongest since How to Train Your Dragon (74), and are relatively close to its predecessor (73). The film has limited animated competition until Disney’s Cars 2 (NYSE:DIS) on June 24, and as a result, we expect it to remain in the top three films for at least three more weekends. Also, we believe international box office will be helped by the film’s IMAX (NASDAQ:IMAX) release.

Despite two high-profile 2011 releases (Kung Fu Panda 2 and Puss in Boots in November), we expect DreamWorks (NASDAQ:DWA) to struggle to generate significant long-term growth due to declining DVD sales and a limited number of releases. In early March, the company announced a revised release slate through 2014, with two titles shifting by a year compared to expectations (The Croods to 2013 from 2012, and How to Train Your Dragon 2 to 2014 from 2013). The company plans two movies in 2011 and 2012, and three movies in 2013.

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