DreamWorks Animation Stock Rockets 22 Percent in a Day

Jeffrey Katzenberg
Paul Jeffers

"Australia's always been very family-friendly. We've had immense success here," DreamWorks Animation CEO Jeffrey Katzenberg said of the studio's decision to open "Dreamworks Animation: The Exhibition" at Melbourne's Australian Centre for the Moving Image, which opened April 9. The exhibition features more than 400 items from the studio's history.

After the stock's big gain Wednesday, DWA sported a market cap of $2.2 billion, about the same as Imax and $1 billion shy of Lionsgate.

Shares of DreamWorks Animation soared 22 percent on Wednesday, one day after the studio run by CEO Jeffrey Katzenberg reported revenue and earnings that made the estimates of analysts look paltry by comparison.

DWA reported fourth-quarter earnings of 55 cents per share, while analysts expected somewhere between 15 cents and 27 cents. Revenue was $319 million compared with estimates of $287 million.

In large measure, DWA has Netflix to thank for the huge numbers, as it, as well as other subscription VOD partners, licensed a bunch of TV shows and movies from the studio. Also, revenue derived from the movie Home was bigger than expected.

"While the headline beat is nice, the theme of growing revenues from Netflix is encouraging, as it highlights how (DWA) is comparatively well positioned for the changing distribution landscape for content," FBR analyst Barton Crockett wrote Wednesday in a research note. 

"As DWA continues to diversify away from the feature film segment domination of years past, the TV production segment is becoming a more meaningful contributor — both on the traditional animated content as well as with the pending move into live-action TV," B. Riley analyst Eric Wold wrote late Tuesday in a research note.

Not all the analysis was positive though, as Wold on Tuesday also lowered his worldwide projection for DWA's current release, Kung Fu Panda 3. He previously expected expected the movie to earn $750 million but is now projecting $650 million.

On a conference call with analysts on Tuesday, Katzenberg said Kung Fu Panda 3, from its Oriental DreamWorks studio, has earned $144 million in China thus far and the heavily regulated country recently granted a 30-day extension for the movie.

The CEO said Tuesday that Kung Fu Panda 3 was "on its way" to becoming the biggest animated film ever released in China and that, while Oriental DreamWorks had challenges early on, it is now in a "very, very enviable and valuable position."

Shares of DWA closed $4.57 higher to $26.53 on Wednesday, and volume was eight times more than normal. The stock, though, remains well below an all-time high of $43.36 set in 2010, before it released a string of money-losing films that included Mr. Peabody & Sherman, Turbo and Rise of the Guardians.

After the stock's big gain Wednesday, DWA sported a market cap of $2.2 billion, about the same as Imax and $1 billion less than Lionsgate.

Email: Paul.Bond@THR.com