DWA shares fall after weak fourth-quarter results

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DreamWorks Animation SKG

Dream­Works Ani­ma­tion SKG

Dream­Works Ani­ma­tion shares dropped $1.84, or 9.4%, to $17.81 in after­noon trad­ing Wednes­day, the day after the com­pany announced fourth-quarter earn­ings that fell short of ana­lysts’ forecasts.

The stu­dio said that costs would rise for its two movies being released this year. DWA also warned that DVD sales will be lower.

Shares of Dream­Works Ani­ma­tion SKG Inc. fell by 8% Tues­day, the day that the com­pany announced that fourth-quarter rev­enue fell 21% to $219 mil­lion from $276 mil­lion a year ago. That beat the $206 mil­lion that ana­lysts had expected.

Net income in the three months end­ing Decem­ber 31 reached $24.3 mil­lion (29 cents per share), down a whop­ping 70% from $85.2 mil­lion (99 cents per share) a year earlier.

Nearly a year ago, shares reached a 52-week high of $28.50.

The stu­dio blamed much of its profit decline to the fact that it released just two films (Puss in Boots and Kung Fu Panda 2) last year, com­pared with three in 2010, includ­ing the last movie in the Shrek franchise.

Kung Fu Panda 2 pro­vided about $50 mil­lion in rev­enue in the final quar­ter of 2011, mostly through its Blu-ray and DVD release. Puss in Boots added $24 mil­lion, mainly through movie ticket sales and licens­ing revenue.

Shrek For­ever After and How To Train Your Dragon both con­tributed rev­enue through hol­i­day home movie sales. Mega­mind brought in con­sumer prod­ucts rev­enue as well.

DWA said that the two movies it’ll make this year — Mada­gas­car 3 and Rise of the Guardians — will cost about $145 mil­lion each, above the usual $130 mil­lion. The stu­dio attrib­utes most of this to longer pro­duc­tion times and higher infra­struc­ture costs. The the­atri­cal release of Mada­gas­car 3 in June is expected to be the next big event for Dream­Works Animation.

Com­pany CEO Jef­frey Katzen­berg warned ana­lysts that DVD sales are still drop­ping in com­par­i­son to the cor­re­spond­ing film’s domes­tic box office receipts. The fourth quar­ter revealed “chal­lenges for the indus­try as a whole,” he added. For one thing, he said, movie fans are rent­ing more and try­ing Net­flix and other alternatives.

Doug Creutz, an ana­lyst with Cowen & Co., observed that stu­dio rev­enue beat expec­ta­tions in part because of a licens­ing agree­ment with Netflix.

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