Home is Dreamworks Animation's biggest hit since 2013's The Croods. Image source: Dreamworks Animation.
What's happening: Shares of Dreamworks Animation SKG (DWA) fell more than 15% on Wednesday, following the release of strong second-quarter results but disappointing forward guidance. At 2:50 p.m., the stock had moved back up to a loss of 12% from the previous close.
Why it's happening: In the second quarter, the animated entertainment studio saw sales grow 40% year over year to $171 million, edging out analyst projections of $167 million. On the bottom line, Dreamworks Animation reported an adjusted net loss of $0.13 per share. Albeit negative, the result was slightly stronger than the year-ago period's $0.18 loss per share and only half the amount of red ink that analysts had expected.
These results were chiefly driven by strong box office results from alien invasion title Home, international pay TV sales for How To Train Your Dragon 2, and a large increase in the number of Dreamworks-produced original TV shows. At first, in Tuesday night's after-hours trading, Dreamworks Animation rose as much as 3.6% on this solid second-quarter performance.
When management used the earnings call to reveal updates to full-year guidance figures, the market tenor quickly changed.
Management held their existing full-year sales projections steady for three of its four reporting segments, but dumped a bucket of ice water over the fourth division.
The consumer products segment is jumping aboard several new cruise ships, and recently opened an indoor theme park in the Philippines. The organization is growing, but not as quickly as management had envisioned.
"We no longer expect to achieve the full year 2015 revenue and gross profit guidance we previously gave [for the consumer products segment]," said Dreamworks Animation CEO Jeffrey Katzenberg. And that's when the stock started falling.
Elaborating on that statement later on, Katzenberg sounded almost poetic:
"I think we thought it was going to come a little faster than it has. I don't think we think it's not coming," he said. "And so it's been a little bit of a moving target for us and certainly we fall a bit short of where we thought. We don't think it's a systemic issue. We think it's more a timing issue."
That's all it took to give Dreamworks Animation a double-digit haircut, moving the stock closer to 52-week lows than to yearly highs.
