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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