Dreamworks Animation SKG Inc Earnings Cheat Sheet: Margins Shrink as Revenue and Net Income Fall

Dreamworks Animation SKG Inc (NASDAQ:DWA) reported its results for the third quarter. Dreamworks Animation SKG is engaged in the development, production, and exploitation of animated films and characters in the worldwide theatrical, home entertainment, television, merchandising and licensing, and other markets.

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Dreamworks Animation SKG Inc Earnings Cheat Sheet for the Third Quarter

Results: Net income for Dreamworks Animation SKG Inc fell to $19.7 million (23 cents per share) vs. $39.8 million (47 cents per share) a year earlier. This is a decline of 50.6% from the year earlier quarter.

Revenue: Fell 14.9% to $160.8 million from the year earlier quarter.

Actual vs. Wall St. Expectations: DWA beat the mean analyst estimate of 20 cents per share. Analysts were expecting revenue of $163 million.

Quoting Management: “DreamWorks Animation’s third quarter results were driven by the blockbuster international box office success of Kung Fu Panda two, the number one animated movie of the year and the fourth highest-grossing film on a worldwide basis,” said Jeffrey Katzenberg, Chief Executive Officer of DreamWorks Animation. “The next big event for the Company is the theatrical release of Puss In Boots on October 28th and we look forward to seeing how it performs around the world through the fourth quarter.”

Key Stats:

Gross margins fell 10.2 percentage points to 32.8%. The contraction appeared to be driven by falling revenue, as the figure fell 14.9% from the year earlier while costs rose 0.3%.

The company topped expectations last quarter after falling short of forecasts in the second quarter with net income of 40 cents versus a mean estimate of net income of 42 cents per share.

Net income has increased 26.1% year over year on average across the last five quarters. The biggest gain came in the third quarter of the last fiscal year, when income climbed more than twofold from the year earlier quarter.

Over the last five quarters, revenue has increased 14.2% on average year over year. The biggest increase came in the fourth quarter of the last fiscal year, when revenue rose 41.9% from the year earlier quarter.

Looking Forward: Over the past ninety days, the average estimate for the fourth quarter has fallen from 62 cents per share to 53 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. The average estimate for the fiscal year is $1.24 per share, down from $1.43 ninety days ago.

Competitors to Watch: Lions Gate Entertainment Corp. (NYSE:LGF), CKX Inc. (NASDAQ:CKXE), Seven Arts Pictures PLC (NASDAQ:SAPX), Point.360 (NASDAQ:PTSX), World Wrestling Entertainment, Inc. (NYSE:WWE), and Rentrak Corporation (NASDAQ:RENT). Lions Gate Entertainment (NYSE:LGF), Disney (NYSE:DIS), Sony (NYSE:SNE), Apple (NASDAQ:AAPL), Time Warner (NYSE:TWX), Comcast Corp (NASDAQ:CMCSA), Crown Media (NASDAQ:CRWN), IMAX (NASDAQ:IMAX), News Corp (NASDAQ:NWSA) and Netflix (NASDAQ:NFLX).

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(Source: Xignite Financials)