World Wrestling Entertainment Earnings Cheat Sheet: Margins Keep Shrinking, but Net Income Increases

World Wrestling Entertainment, Inc. (NASDAQ:WWE) reported higher profit for the second quarter as revenue showed growth. World Wrestling Entertainment, engaged in the development, production and marketing of television and pay-per-view event programming and live events and the licensing and sale of consumer products featuring its World Wrestling Entertainment brands.

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World Wrestling Entertainment Earnings Cheat Sheet for the Second Quarter

Results: Net income for the entertainment company rose to $14.3 million (19 cents per share) vs. $6.3 million (8 cents per share) in the same quarter a year earlier. This is a more than twofold rise from the year earlier quarter.

Revenue: Rose 33.4% to $142.6 million from the year earlier quarter.

Actual vs. Wall St. Expectations: WWE reported adjusted net income of 21 cents per share. By that measure, the company fell short of mean estimate of 24 cents per share. It beat the average revenue estimate of $138.5 million.

Quoting Management: “Through the second quarter, WWE has generated top-line growth across our four business segments led by the strength of WrestleMania. WrestleMania XXVII achieved more than one million pay-per-view buys worldwide and reached record levels of both revenue and profit,” stated Vince McMahon, Chairman and Chief Executive Officer. “Our earnings, however, were constrained by the performance of our movie business, adverse home video sales trends, and the status of our talent development. Key operating metrics, such as average live event attendance and pay-per-view buys showed declines in the second quarter when evaluated on a comparable basis to last year (excluding WrestleMania). But, while our key metrics were down, the gap to our prior year performance continued to diminish. We believe this trend demonstrates that we are making important progress on our talent development and creative initiatives. As we continue to evaluate the potential of different forms of distribution, such as a WWE Network, we are more confident than ever that we can create and monetize content in a variety of existing and new media, and thereby create meaningful incremental value for our shareholders.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell 3.3 percentage points to 37.7% from the year earlier quarter. Over that time, margins have contracted on average 5.1 percentage points per quarter on a year-over-year basis.

The company fell short of forecasts after beating estimates in the previous two quarters. In the first quarter, it topped the mark by one cent, and in the fourth quarter of the last fiscal year, it was ahead by one cent.

Last quarter’s profit increase breaks a streak of two consecutive quarters of year-over-year profit decreases. In the first quarter, net income fell 65.2% while the figure dropped in the fourth quarter of the last fiscal year.

Revenue rose last quarter after seeing a drop the quarter before. Revenue fell 13.6% to $119.9 million in the first quarter from the year earlier.

Competitors to Watch: CKX Inc. (NASDAQ:CKXE), CBS Corporation (NYSE:CBS), Time Warner Inc. (NYSE:TWX), Lions Gate Entertainment Corp. (NYSE:LGF), News Corporation (NASDAQ:NWSA), Live Nation Entertainment, Inc. (NYSE:LYV), DreamWorks Animation SKG, Inc. (NASDAQ:DWA), Madison Square Garden, Inc. (NASDAQ:MSG), and Cinedigm Digital Cinema Corp. (NASDAQ:CIDM).

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(Source: Xignite Financials)