Without a doubt, DreamWorks Animation (NYSE: DWA) really nailed it with its latest computer-cartoon sequel, Madagascar: Escape 2 Africa. According to estimates at Boxofficemojo, the film, which is distributed by Viacom (NYSE: VIA), was number one at the box office over the weekend at domestic theaters.
That was expected. But I have to give kudos to the studio's marketing department for improving the previous film's opening weekend. Madagascar, which was released in May 2005, took in $47 million during its opening weekend. As of this writing, Escape 2 Africa has been credited with about $63 million. Considering that this isn't the summertime, I thought the sequel's debut performance was pretty cool.
And here's another equally cool fact: if the estimates hold, then Escape 2 Africa's first-weekend take will be slightly higher than Kung Fu Panda's opening weekend of $60.2 million. You've got to call that a success. Disney's (NYSE: DIS) Pixar brand definitely better take notice, especially if DreamWorks Animation can consistently put out blockbusters during both the summer and fall.
DreamWorks Animation (NYSE: DWA), the computer-cartoon studio that competes with the animation product of other entities such as Disney (NYSE: DIS), News Corp. (NYSE: NWS) and Sony (NYSE: SNE), posted Q3 results after the close on Tuesday. Revenues saw a modest decrease of almost 6%, coming in at $151.5 million. I am categorizing a 6% decrease as modest in this case because the studio had a Shrek sequel out in the previous year. The drop was expected. Net income was 41 cents per diluted share, a figure which includes a $0.03 tax benefit. Even so, DreamWorks Animation beat expectations. Wall Street was counting on only 32 cents per share.
Operational cash flow isn't faring too badly. It increased 9%, and the company seems to be doing well enough in terms of generating revenues from its portfolio of films. Kung Fu Panda helped to drive the quarter, but it isn't done yet, as the home-video release should affect Q4 in a most positive manner.
Now that the data is out, DreamWorks Animation is really readying itself for its next big test. Madagascar: Escape 2 Africa, the sequel to the hit Madagascar, is waiting in the wings. In fact, the wait is almost over. The film is due November 7, and the company needs to post big numbers on this one.
Revenues for the second quarter increased 21% to almost $3.9 billion. Net income from continuing operations expanded 19% to 64 cents per share. That beat the estimate I was using by three pennies (other sources listed a lower estimate for earnings). No matter how you slice it, Viacom showed Wall Street how it's done.
Now, let me admit how wrong I was. I thought media networks would shine during the quarter and that the film division might not do as well. Operating income at media networks increased 4%, while Paramount and its colleagues increased their segment's profit by almost 300%! You can thank the new Indiana Jones movie, as well as Marvel's (NYSE: MVL) Iron Man and DreamWorks Animation's (NYSE: DWA) Kung Fu Panda, for bringing the crowds into the multiplex and the money into Viacom's coffers.
Viacom (NYSE: VIA) is due to report Q2 earnings on Tuesday, July 29, after the market closes. What will be in store for the media company and fierce competitor of Disney (NYSE: DIS), News Corp. (NYSE: NWS), Sony (NYSE: SNE), and Time Warner (NYSE: TWX)? According to data at Zacks.com, the company may report something in the vicinity of $0.61 per share, which would be good for 12% growth on the bottom line. Viacom has a reasonable chance of beating the estimate, based on past history.
There will be a few key elements that investors will be looking at. One product that has been a driving factor for Viacom's success is, believe it or not, a video game. Rock Band, which competes against Activision Blizzard's (NASDAQ: ATVID) Guitar Hero titles, has been a boon for the company, and the MTV segment specifically. The game, which is distributed by Electronic Arts (NASDAQ: ERTS), will have a sequel coming out this fall, and I hope management enlightens Wall Street about how it feels it will do against Activision Blizzard's new iteration of its own musical-gaming system and how it plans to promote it. Will there be any special synergies between MTV and the sequel? Watch for data on the number of song downloads that Rock Band is fueling.
When I took a look at Viacom's last earnings report, I found that the media-networks division was doing great business. Its operating income had jumped 15%. The media segment, which includes the valuable MTV Networks, should do well again in Q2, and I would expect something close to this kind of growth rate. However, I would be watching for signs from management that the economy may be affecting advertising. Going forward, this will be the challenge for MTV, Nickelodeon, etc. And speaking of Nickelodeon, are there any initiatives on the board to counteract the incredible growth that the Disney Channel has seen thanks to properties such as Hannah Montana? Investors should listen to the conference call for information about marketing plans and new shows, as well as merchandising schemes for the upcoming holiday season.
Activision Blizzard Inc. (NASDAQ: ATVID) reported preliminary Q1 earnings earlier in the week, and from a shareholder's perspective, they were great. These results are for Activision itself, and do not take into account the effect of the merger with Vivendi Games.
OK, consider the following. Management had previously thought that Q1 would see revenues of about $500 million. The game publisher should actually deliver around $650 million on the top line. And in terms of earnings per diluted share, Activision should do at least $0.16. Previously, the call was for $0.04 per diluted share. Activision obliterated its own projections, and one has to wonder when the momentum is going to stop.
I hope it never does, of course, since I own shares of the company. Competitors such as Electronic Arts (NASDAQ: ERTS) and THQ (NASDAQ: THQI) are doing everything they can to keep up. Their stocks certainly aren't near 52-week highs, and in the case of EA, a takeover of Take-Two Interactive (NASDAQ: TTWO) seems to be the biggest priority in terms of counteracting the Activision Blizzard juggernaut. Now, in terms of drivers for the quarter, Activision benefited from Guitar Hero and, believe it or not, a game based on DreamWorks Animation's (NYSE: DWA) Kung Fu Panda. In fact, the Panda title was mentioned first in terms of drivers. This shows that, even though Activision has some awesome intellectual properties of its own, it still knows how to derive value from investments in licensed properties.
Well, I was wrong about Sony's (NYSE: SNE) Hancock. Sure, I knew it was going to be the number-one movie over the Fourth of July holiday period, but come on, who didn't know that? As of this writing, Boxofficemojo estimates that the Will Smith picture took in $66 million over the three-day timeframe. However, Hancock had opened earlier in the week, and I thought that, by the time all was said and done, the film's cumulative gross by now would have been well over $100 million. Well, the cume now stands at around $107 million. I was thinking more along the lines of $125 million and above for a total tally by this point. Hancock came in a little weaker than expected, considering what seemed to be a very awesome cinematic experience as communicated by the marketing campaign.
Disney's (NYSE: DIS) Wall-E came in second over the weekend with around $33 million. The Pixar cartoon now has about $128 million to its credit. Wanted, distributed by General Electric's (NYSE: GE) Universal, was third with over $20 million. Time Warner's (NYSE: TWX) Get Smart and DreamWorks Animation's (NYSE: DWA) Kung Fu Panda were fourth and fifth, respectively. Here's an interesting note on Get Smart. Even after the holiday weekend, and after having been out in the marketplace for a few weekends, it still has yet to reach a total gross of $100 million. As of now, it has a little over $98 million in the bank. That number may change a bit when final figures are in, but in this day and age, when a summer movie with such star power (it stars Steve Carell) doesn't reach $100 million by the second weekend or sooner, it can't be considered super blockbuster material.
Well, it wasn't a terribly exciting box-office weekend. Frankly, I thought there would be more fireworks for the Fourth from these films. And as for all the stocks mentioned here, the bear market will probably keep them weak. The most direct play on the movie business is obviously DreamWorks Animation, and I would wait for that one to come in more before thinking about buying.
Disclosure: I own Disney and GE; positions can change at any time.
I didn't think Disney's (NYSE: DIS) Wall-E movie would do as well as it did over the weekend. I thought $60 million was too much to hope for (see my previous piece on the subject). I was wrong. According to Boxofficemojo, the Pixar picture pulled in more than $62 million at domestic theaters and came out on top.
Assuming the film continues to do well in upcoming weekends, Wall-E should provide a nice counterbalance to the relative disappointment of Disney's Prince Caspian project that was released in May. While Wall-E won't move Disney's stock all by itself, the movie and its characters should help drive the studio segment in future quarters, as well as provide some opportunities for promotions and initiatives in other parts of the company, such as the theme parks.
Wanted, distributed by General Electric's (NYSE: GE) Universal, debuted in second place with a haul of more than $50 million. The movie, starring Angelina Jolie, had some snazzy, Matrix-like commercials powering its appeal. I can see why the numbers were big on this one. Time Warner (NYSE: TWX) and Get Smart didn't stand a chance against Wanted. It dropped two spots to third place with a tally of $20 million. And, no, I still don't find Steve Carell funny.
Walt Disney (NYSE: DIS) has an interesting weekend coming up. The new Pixar film, Wall-E, opened today. While everyone expects it to be a hit, no one knows yet how big a hit it will ultimately be.
Pixar, of course, is a major brand in computer-generated cartoons. Its major competition is DreamWorks Animation (NYSE: DWA). The latter's most recent hit, Kung Fu Panda, opened earlier this summer box-office season with a $60.2 million first-weekend take, according to Boxofficemojo. Last year, Ratatouilledebuted with a first-weekend take of $47 million. In my mind, for Wall-E to please shareholders and show Disney that its Pixar brand is a reliable money machine, the animated feature needs to do at least $60 million. It can't do anywhere near the Ratatouille flick since that was an example of weak opening performance, in my opinion.
I read a great review on Wall-E at the Hollywood Reporter. The author heaps praises on the film and says that Pixar's streak of success is intact. That's pretty pleasing. Yet, the review also worries me to some extent (I'm a Disney shareholder). The author says that there isn't a lot of dialogue in the picture (I guess the robot characters don't speak) and that it might be such a smart project that some moviegoers might not fully appreciate it. In this competitive timeframe, that doesn't make me feel good. I'd rather the film be simple blockbuster material for the popcorn crowd. I don't want the young kids in the audience to feel their attention spans being strained in the least. I'm not looking for art in this case. I just want my company to make as much money as possible.
I didn't think Get Smart was going to come in at number one, but that's exactly what happened, according to Boxofficemojo. The film, distributed by Time Warner (NYSE: TWX), took in an estimated $39 million at domestic theaters. The film, quite frankly, looks horrible, and I don't get the fascination people have with Steve Carell's supposed "comedic talents." I don't really find him funny. Doesn't matter, though, because moviegoers have crowned Carell king of the box-office weekend whether I like it or not.
I'm actually more concerned with the race for second place between Marvel's (NYSE: MVL) The Incredible Hulk and DreamWorks Animation's (NYSE: DWA) Kung Fu Panda. Both are estimated as of this writing to have booked a little more than $21 million in ticket sales. I'm concerned about this because I own shares of Marvel, and I'm disappointed in the movie's box-office performance. As of now, the new Hulk has about $96 million in terms of total gross.The fact that it hasn't scored over $100 million by now, coupled with it experiencing a 60% drop for this weekend compared to its debut weekend, leaves me less than satisfied.
Viacom's (NYSE: VIA) The Love Guru bombed. Looks like you can't always count on stars to deliver the important opening-weekend audience. Are people getting sick of Mike Myers? (Jonathan Berr wondered the same thing.) He was only able to conjure up about $14 million for Viacom shareholders, bringing his film to a fourth-place debut. That's embarrassing for Myers, but unlike Steve Carell, he is genuinely funny (although maybe not so much in this particular film, it seems). News Corp.'s (NYSE: NWS) M. Night Shyamalan movie The Happening grossed around $10 million and came in fifth.
Marvel's (NYSE: MVL) movie The Incredible Hulk was incredibly disappointing (to me at least). No, I'm not talking about the quality of the movie. I didn't actually see it. But Boxofficemojo is reporting that it has grossed an estimated $54.5 million at domestic theaters over the weekend. While that was good enough for first place, it wasn't good enough for shareholders. The movie bombed, plain and simple.
Why am I being so hard on a number-one movie? It's not so difficult to understand. The awful Hulk movie that was released back in 2003 grossed $62.1 million in its opening weekend. There's no way to spin this. We've had five years of inflation between that terrible flick and this new iteration. Simply put, it should have grossed at least $65/$70 million, especially on the heels of Iron Man. I'm a shareholder of Marvel, and I don't like the fact that the success of Marvel's first movie of the summer didn't synergize a little better with the angry green guy.
Focusing on the positive, Marvel was able to beat DreamWorks Animation (NYSE: DWA) and its Kung Fu Panda project. The cartoon took in about $34 million and came in second. M. Night Shyamalan's The Happening, distributed by News Corp. (NYSE: NWS), did okay by coming in third with a gross of around $30 million. Some analysts thought that the horror flick would do a little bit less than that number. Personally, I thought it should have come in second place considering Shyamalan's name, but I guess people aren't as excited as they used to be about his exercises in cinematic twists (the fact that it was rated R also inhibited its blockbuster potential). Sony's (NYSE: SNE) Adam Sandler comedy You Don't Mess with the Zohan did in fact get messed with yet again, dropping two spots to fourth place, grossing about $16 million. I've heard bad reviews on this one. Viacom (NYSE: VIA) and Indiana Jones and the Kingdom of the Crystal Skull were daring enough for fifth place. Everyone's favorite archaeologist has now breached the $275 million level. Great to see a favorite character of mine from the past doing so well.
The weekend domestic box-office results weren't too shocking. I pretty much knew that DreamWorks Animation's (NYSE: DWA) Kung Fu Panda would kick its way to the top (I wonder how many writers will be using that phrase when covering the movie this week). But when I saw that Boxofficemojo estimated a $60 million gross for the cartoon, I actually was disappointed. These days, a $60 million haul in the summertime doesn't seem impressive. I thought Panda might have been worth a little more. But, after checking some of the historical openings for other DreamWorks pictures, I realized that Panda did all right. It actually was one of the bigger debuts for the studio.
Even though the cartoon seemed a lock for first place, I thought Sony's (NYSE: SNE) You Don't Mess with the Zohan project would be a close second. At a $40 million estimated gross, it wasn't. I don't know if you can mess with Zohan or not, but you apparently can mess with Adam Sandler and best his star power. Viacom's (NYSE: VIA) Indiana Jones and the Kingdom of the Crystal Skull is still going strong in third place. It has crossed the $250 million level, and it is headed for $300 million. Time Warner's (NYSE: TWX) Sex and the City, however, has lost a great deal of thunder, dropping from first to fourth place in its second weekend at the multiplexes. It is just shy of the $100 million mark. Is Sex nothing more than an opening-weekend phenomenon? It seems that way, but we'll have to see how steep the drops are in subsequent weekends.
The Strangers, from General Electric's (NYSE: GE) Universal Pictures, dropped from third to fifth place in its second weekend, a rather predictable event for a horror movie. At a $37 million total gross so far, The Strangers won't go down as a huge triumph, but you've got to love the profit potential for this low-budget flick that succeeded in counterprogramming its way to summertime glory. Universal obviously thought the film's concept possessed a chance to score a $100 million total haul since it placed the movie against the big guns of this busy period, but that's okay, the try was worth it in this case.
Since last year's summer movie preview featured mostly sequels and adaptations, this year's preview has been expanded to include more than just potential "blockbusters." The following is a chronological list of not only the most hyped film fare of the summer, but other noteworthy smaller entries, and a short commentary on each.
5/2 - Iron Man, Viacom (NYSE: VIA)'s Paramount Pictures The first of two big Marvel Entertainment (NYSE: MVL) adaptations of the summer, the Robert Downey Jr. led Iron Man has been getting a ton of hype and critical acclaim. This is the second year that a comic book adaptation has kicked off the summer, following last year's Spider-Man 3, which grossed over $150M over its opening weekend.
5/9 - Speed Racer, Time Warner (NYSE: TWX)'s Warner Bros. Another big-budget adaptation of a generations-old cartoon. Last year's Transformers was, to my surprise, a huge success, so maybe Speed Racer, in the capable directing hands of the Wachowskis, can be as well.
Viacom (NYSE: VIA) issued its Q1 earnings results on Friday. The conglomerate seems to be doing all right with its strategy of leveraging content to drive growth. Revenues were up 15%, and adjusted diluted earnings per share jumped 29% to $0.44. But it can be seen that there's a dichotomy going on if you look into the performance of the two main operating segments: media networks saw its operating income rock up 15% while filmed entertainment tallied up an operating loss for the quarter. Even though that loss was narrowed by over 40%, I always get disappointed when I see a studio in the red -- it reminds me that the movie business is a risky, oftentimes low-return one.
But, should you be down on Viacom's movie business right now? Maybe not, since Paramount is currently distributing Marvel's (NYSE: MVL) Iron Man -- seeSheldon Liber's recent article about the film. That should hopefully improve things going forward, as might Indiana Jones and the Kingdom of the Crystal Skull. Viacom also will be distributing Kung Fu Panda for DreamWorks Animation (NYSE: DWA). Sumner Redstone is certainly counting on these projects to be huge. And speaking of huge, the company's Rock Band continues to fuel the media networks segment -- it's sold by Electronic Arts (NASDAQ: ERTS), and it is apparently holding its own against Activision's (NASDAQ: ATVI) Guitar Hero. The synergies between MTV and the music system are obviously pushing this one. Maybe the studio should get in on the video-game action by greenlighting a movie based on Rock Band -- maybe Jack Black could star in it!
Overall, I think Viacom is performing as it should, and I hope the movie division can bring in some profits during the coming months (I think it will). As for the stock, I'd ideally like to see it a bit lower before I'd consider buying it.
Disclosure: I own shares of Activision and Marvel; positions can change at any time.
DreamWorks Animation (NYSE: DWA) reported Q1 earnings Tuesday after the market close, and I have a funny feeling that its shareholders were pretty pleased. Revenues were like a fairy tale (that's a Shrek reference), increasing 67% to $156.6 million. Earnings per share kicked it like a black-belt martial artist (that's a Kung Fu Panda reference), increasing 87% to 28 cents per share on a reported basis; on an adjusted basis, the growth was more like 73%.
Wow; talk about growth rates! Even on an adjusted basis, you've got to like the bottom-line appreciation. And it should be noted that DreamWorks beat the street by three pennies according to Briefing.com. Want more good news? Operational cash flow soared like a bee in flight (that's a Bee Movie reference), expanding 22% to $107.7 million.
The DreamWorks story is very much driven by the company's film slate, as opposed to conglomerate competitors such as Time Warner (NYSE: TWX), Disney (NYSE: DIS), and News Corp. (NYSE: NWS), which have a lot more in terms of moving parts. Shrek the Third, as well as library titles, helped drive the quarter. Coming up is Kung Fu Panda and a sequel to Madagascar. Those wishing to buy the stock ahead of the company's upcoming titles should look for pullbacks. I really like DreamWorks Animation's prospects, but it bothers me that I haven't heard too much buzz surrounding the Panda project. I'm sure it's coming, though, but I'm also sure that I would really love the stock a lot more if it were closer to the 52-week low. But don't get me wrong, I'm not a growling bear on the company. I think the Q1 earnings and cash flow performance are top notch. Tthe company is building out an enviable library of product, and I think traders and long-term investors alike will get something out of DreamWorks Animation's stock.
Disclosure: I own shares in Disney; positions can change at any time.
Well, you can't win 'em all. I certainly found that out with 
I didn't think 
I didn't think Get Smart was going to come in at number one, but that's exactly what happened, according to 
The weekend domestic box-office results weren't too shocking. I pretty much knew that 
DreamWorks Animation
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