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World Wrestling Entertainment (NYSE: WWE)'s stock jumped Thursday after the market took a look at the company's Q3 data. Overall revenues didn't see much of an increase, but earnings per share rose over 70% to 12 cents. Driving this incredible growth rate was a cut in gross costs. Analysts were betting on 10 cents in per-share profit, according to Earnings.com.
Did WWE deserve a pop of 7% during yesterday's trading session? Some of the excitement was certainly justified. It's obviously a positive thing to see management acting so diligently when it comes to costs. Of course, there was an increase in selling, general, and administrative expenses during the quarter, so there is still room for improvement (the nine-month table did show a decrease in this line, to be fair).
On the other hand, WWE has to get the top line moving again. One area to concentrate on is the pay-per-view portfolio. Every possible effort needs to be engaged in this department to bring the buy rates up. When I see one of the company's main premium events, SummerSlam, not receiving as many orders, I come away with a sense that WWE is losing focus, and that its audience may be likewise losing interest.
Dividend investors, take note: you don't have to worry about the nine-month cash-flow statement. More than enough money was generated to satisfy the high yield on the stock. Net cash from operations saw a huge jump from the comparable period.
My feeling is that WWE's stock will remain in this range for a while. I would not have bought WWE on Thursday. If you're looking to acquire shares of the company, try to get in at a lower price.
So long as WWE continues to do okay in the cash-flow department, you can sit back and collect the dividends while you wait for the top line to get back to growth. Hopefully, CEO Vince McMahon will figure out a way to make wrestling a compelling form of entertainment once again. With so much competition from the Internet and video games, WWE's main demographic probably finds it difficult to keep up with storylines that don't possess a lot of entertainment value. Granted, it's difficult to discern exactly what viewers want, but management will simply have to try harder to do exactly that.
Disclosure: I don't own any company mentioned; positions can change without notice.
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