World Wrestling Entertainment Inc. Earnings Cheat Sheet: Margins Suffer for Five Quarters Straight, Profit Drops

World Wrestling Entertainment Inc. (NYSE:WWE) reported its results for the third quarter. World Wrestling Entertainment is 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 Third Quarter

Results: Net income for World Wrestling Entertainment Inc. fell to $10.6 million (14 cents per share) vs. $14.3 million (19 cents per share) a year earlier. This is a decline of 26.1% from the year earlier quarter.

Revenue: Fell 1% to $108.5 million from the year earlier quarter.

Actual vs. Wall St. Expectations: WWE reported adjusted net income of 19 cents per share. By that measure, the company beat the mean estimate of 15 cents per share. Analysts were expecting revenue of $106.7 million.

Quoting Management: “In the third quarter, our results reflected the Company’s continued focus on improving business results in a difficult environment,” stated Vince McMahon, Chairman and Chief Executive Officer. “Despite the challenging economic headwinds, both domestically and abroad, we generated increased profits across a majority of our businesses, with the main exception being our film business which we continue to monitor and refine to improve future performance. We believe the sluggish economy and our ongoing talent transition were important factors that affected the results of our other businesses. Based on our history of developing talent and creating content with broad appeal, we are confident we can address our creative challenges. Further, by taking advantage of our strategic opportunities, including the anticipated 2012 launch of a WWE network, we can achieve meaningful growth.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell three percentage points to 40.6% from the year earlier quarter. Over that time, margins have contracted on average 4.9 percentage points per quarter on a year-over-year basis.

The company topped expectations last quarter after falling short of forecasts in the second quarter with net income of 21 cents versus a mean estimate of net income of 25 cents per share.

Net income has increased 14% year over year on average across the last five quarters. The biggest gain came in the second, when income climbed more than twofold from the year earlier quarter.

Revenue fell last quarter after seeing a rise the quarter before. Revenue rose 33.4% to $142.6 million in the second quarter from the year earlier.

Looking Forward: The outlook for the company’s results in the upcoming quarter is unfavorable. The average estimate for the fourth quarter is 15 cents per share, down from 16 cents ninety days ago. The average estimate for the fiscal year is 62 cents per share, down from 67 cents ninety days ago.

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), Global Entertainment Corp. (GNTP), and Cinedigm Digital Cinema Corp. (NASDAQ:CIDM).

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(Source: Xignite Financials)