Few films to Marvel at in 2009

Labor strife slows prod'n; licensing fuels Q4 surge

Labor disputes, whether real or merely predicted, have put a crimp in Marvel Entertainment's goal of releasing two films — or maybe even one — next year.

"We're working right now to get the preparations ready to have a chance for one film in 2009," chairman David Maisel said during Tuesday's earnings call with analysts.

"Regarding 2009, we have been obviously affected by the labor situation in Hollywood," referencing the recently ended writers strike and "the uncertainty caused by the upcoming expiration of the actors agreements at the end of June."

Maisel didn't say which character might star in a 2009 movie, if there is to be one, though he said that films featuring Ant-Man, Captain America, Thor and the Avengers are in development.

Marvel is transitioning from a company that simply licenses such characters as Spider-Man and X-Men to film studios to one that will self-fund its own films. First up is "Iron Man" on May 2, then "The Incredible Hulk" on June 13.

The company said fourth-quarter profit jumped 136% to $27.6 million on revenue that rose 28% to $109.3 million.

While those results topped Wall Street expectations, shares of Marvel dropped 3.6% to $26.75, in part because Marvel did not raise its full-year revenue guidance of $360 million-$400 million.

Analysts expressed concern about a possible U.S. recession cutting into Marvel's business prospects, especially concerning licensed toys and other products based on its stable of 5,000 characters.

Maisel, though, told analysts that "we are not aware of any specific circumstances right now where Marvel's business has been hurt by macroeconomic trends."

Licensing accounted for the lion's share of Marvel's revenue in the fourth quarter, rising from $25.5 million to $58.5 million, with 39% of that courtesy of Spider-Man.

Publishing revenue rose from $28.6 million to $30.3 million, while toys revenue shrunk from $31.1 million to $20.5 million. Operating income for toys, though, more than doubled to $15 million as the company moved from producing and selling its own to licensing those rights to Hasbro.

SMH Capital analyst David Miller reiterated his "buy" recommendation and $34 target on Marvel shares.

In part, his bullishness comes from a strong track record in regard to feature films based on Marvel characters. Of the 13 in the past eight years, he figures they have grossed a global average of $337.9 million apiece.

"As such, we believe 2009 is shaping up to be a banner year for Marvel Studios as the company will likely see the bulk of receipts from 'Iron Man' and 'Hulk'; licensing fees from 'Wolverine' (and) the 'X-Men' spinoff' and possibly minimum guarantees from 'Spider-Man 4,' " Miller said.
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