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Will Mr. Peabody & Sherman Be a Hit for DreamWorks Animation?


DreamWorks Animation (NASDAQ: DWA  ) has delivered massive hits in the past that include How to Train Your Dragon, Kung Fu Panda, Shrek, Rise of the Guardians, and Madagascar. It's hoping to deliver similar success with Mr. Peabody & Sherman. There are several reasons why this movie will play a big role for the company, and the information below provides clues as to whether or not it will be a success.

Lacking growth
DreamWorks Animation is highly capable of delivering top-notch movies. However, the time frames between these hits tend to be long. Without consistent movie releases that are well-received by broad audiences, it's difficult for DreamWorks Animation to grow consistently.

For instance, DreamWorks Animation's top-line growth over the past five years was just 1.44%. This isn't terrible considering the current economic environment and the failures of many companies across numerous industries, but it's also far from impressive. On top of that, DreamWorks Animation sports a profit margin of negative 5.84%. Over the past year, the company has generated $59.68 million in operating cash flow, and its cash position is $156.43 million versus $300 million in long-term debt.

Once again, these numbers aren't terrible, but they still put pressure on the company. If Mr. Peabody & Sherman can deliver, then it could remove a lot of that pressure. Early feedback from critics and some moviegoers provide hints as to whether or not this can come to fruition.

Early hints
Although it will not be released until March 7 in the United States, Mr. Peabody & Sherman was already released in the U.K. on February 7. Therefore, we have an opportunity to see what other people think of the movie before it's released domestically. On, Mr. Peabody & Sherman scores a 6.7 of 10 (747 reviews). In the movie-rating world, this is average.

If you don't put your trust in audiences abroad due to different entertainment tastes, then consider domestic critic reviews. According to, Mr. Peabody & Sherman is rated as So-So by critics.

David Gritten of The Telegraph seemed to be more impressed with the movie than most critics: "It's sweet-natured and amusing, with a story to captivate kids, yet the script has enough witty touches to keep adults laughing too."

Peter Bradshaw of The Guardian: "It's a headspinningly wacky premise, but once this is achieved, there's an awful lot of expected fun to be had, boasting zany adventures with historical figures."

Leslie Felperin of The Hollywood Reporter: "A pleasant, polished, but somewhat by-the-numbers effort."

Guy Lodge of Variety: "The narrative's time-travel element allows for plenty of fluffy, fleet-footed action."

For Generation Xers, it's clear to see that Mr. Peabody & Sherman is the kids' version of Bill & Ted's Excellent Adventure. However, it would be nearly impossible for the dialogue to be as strong as what Bill & Ted offered. Ted: "Excuse me, when did the Mongols rule China?" Circle K cashier: "I don't know, I just work here." Yes, that was sarcasm. Despite the ridiculousness of Bill & Ted, the dialogue is still memorable. 

An important entertainment side note
Bill & Ted's Excellent Adventure was produced by Interscope Communications. While that movie was a mild success, Interscope saw its best years when it partnered with Disney (NYSE: DIS  ) , which marketed five Interscope movies between 1992 and 1995. Without Disney in the fold, Interscope Communications couldn't deliver at the box office. This shows the power and influence of Disney in the entertainment world.

Moving back to the modern day, is it possible for Mr. Peabody & Sherman to steal The Lego Movie's thunder?

Everything is awesome
The Lego Movie is a Warner Bros. production, and Warner Bros. is a subsidiary of Time Warner (NYSE: TWX  ) .

The Lego Movie currently sports an 8.5 of 10 rating on IMDb, much higher than what's projected for Mr. Peabody & Sherman.

As of February 19, The Lego Movie's domestic box office receipts totaled $149,006,940. Its worldwide box office total: $200,206,940. Excluding marketing and other expenses, this was on a budget of $60 million. Therefore, it's fair to assume that The Lego Movie will be very profitable for Warner Bros.

What's really key here for Time Warner investors is that The Lego Movie 2 is already in the works. When a movie franchise sees success, it tends to bring in massive revenue and profits not just thanks to box office success, but because of in-home entertainment and merchandising as well.

Unfortunately for DreamWorks Animation, Mr. Peabody & Sherman will have to compete with The Lego Movie when it's released. The Lego Movie did $69,050,279 in its opening weekend (domestic). projects that Mr. Peabody & Sherman will do $25 million in its opening weekend, and that it will gross a total of $98 million domestically. That would be a solid performance, but nothing compared to The Lego Movie, and it would not be enough to relieve some pressure on DreamWorks Animation.

Speaking of successful movie franchises.... Fortunately, DreamWorks Animation will release How to Train Your Dragon 2 on June 13. Here's the trailer:

That will be followed up by How to Train Your Dragon 3 on June 17, 2016. As long as DreamWorks Animation owns this franchise, potential remains. The original had a total domestic gross of $217,581,231, and a worldwide gross of $494,878,219. This was on a budget of $165 million.

The Foolish takeaway
It's difficult to predict how Mr. Peabody & Sherman will resonate with an American audience, but it seems as though the results will be good, not great. On the other hand, the How to Train Your Dragon franchise gives DreamWorks Animation plenty of life. If you look at the company's historical stock performance, the stock peaked right before the original was released. Excitement about future installments could lead to a similar pattern. Please do your own research prior to making any investment decisions. 

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Dan Moskowitz

Dan Moskowitz spends the majority of his time researching stocks. He believes that fundamentals, and logic pertaining to industry trends, win out over the long haul.

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