And a Panda Makes Three

And then there were three.

DreamWorks Animation's (NYSE: DWA  ) quest for a third original property to rally around is over now that Kung Fu Panda has scored $630 million in ticket sales around the world. It is the computer animation studio's highest-grossing non-sequel.

"Driven by the film's exceptional theatrical performance on a worldwide basis, the company has found in Kung Fu Panda its third franchise," CEO Jeffrey Katzenberg is quoted as saying in last night's earnings press release.

This is big news, even if it was expected. Ever since DreamWorks Animation scored hits with Shrek and Madagascar, the company has been hungry for a third killer brand. With three no-brainer juggernauts in place, the studio can roll out each franchise every three years, and balance that out with annual original releases.

Marginal hits like Over the Hedge, Shark Tale, and Bee Movie didn't make the cut. The search -- for now -- is finally over.

It comes at a great time for DreamWorks Animation. The company is delivering better-than-expected third-quarter results. Revenue of $151.5 million and earnings of $0.38 a share (before a tax benefit) are just below last year's showing, but that was a given, since Shrek the Third rocked the multiplex last summer. The key here is that analysts were only looking for a profit of $0.32 a share on $130.4 million. The studio has now beaten Wall Street's earnings guesstimates in each of the past dozen quarters.

Kung Fu Panda's coronation also comes a week before Madagascar: Escape 2 Africa hits theaters. It would have been a brutal blow to the company if the sequel bombed and all it had to fall back on was the Shrek well.

Now the company has the freedom to keep taking chances. If it happens to find a fourth franchise, so be it. There's only so long that any franchise can be milked for sequels.

It's not just about the movie, television, and DVD sales, of course. Memorable characters are great licenses. Just ask some of the studio's licensing partners, like video game maker Activision (Nasdaq: ATVI  ) , cereal giant Kellogg's (NYSE: K  ) , and stuffed-animal retailer Build-A-Bear Workshop (NYSE: BBW  ) . Walk into a McDonald's (NYSE: MCD  ) next week, and see which Madagascar character you find in your Happy Meal.

Given the gee-whiz technology behind computer animation, DreamWorks Animation marketing partners even include Intel (Nasdaq: INTC  ) and Hewlett-Packard (NYSE: HPQ  ) . Intel-powered HP machines make up the studio's fleet of 700 workstations and 500 servers.

In short, DreamWorks Animation has plenty of friends out there. It's also not ashamed to be its own friend, after having repurchased $185 million worth of stock this year.

Movie studios are prone to bumpy financials, but given the one constant -- that DreamWorks Animation has now smoked analysts every quarter over the past three years -- it's hard to not bet on this team of ogres, city zoo critters, and a Jack Black-voiced panda.

Here are a few panda games to play:

Intel is a Motley Fool Inside Value selection. DreamWorks Animation SKG and Activision Blizzard are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz is a sucker for quality animation. Yes, he owns shares of DreamWorks Animation. The Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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