Pixar Disappoints Me

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It's getting to be old hat. Pixar (Nasdaq: PIXR) lulls the market into setting modest profit targets and then blows them to bits. Last night the company posted earnings of $0.67 a share, well ahead of both the $0.23 a share it earned last year and the $0.47 mark that analysts were expecting. Revenues tripled to $161 million on the strength of the top-selling The Incredibles on DVD.

You sly dog, Pixar.

What can't you say about Pixar? You will have to look pretty hard to find a company producing better net margins than the 50.8% that Pixar produced this past quarter. Yes, more than half of every dollar it made worked its way to the bottom line -- and that includes shelling out a good chunk in taxes. So, yes, Pixar disappoints me, but only in the sense that it predictably outperforms to the point where it has become anticlimactic. Only the ordinary from that company would take me by surprise.

While there is obviously a great deal of attention being paid to its relationship with Disney (NYSE: DIS) -- Pixar's Steve Jobs indicated that he has had "nice conversations" with Disney's incoming chieftain Bob Iger but no actual negotiations -- it's still on track to deliver Cars later this year, which will conclude its deal with Disney for original movie properties.

While that doesn't mean that Disney won't stick around as a distribution partner once the first fully Pixar-funded release hits the big screen in the summer of 2007, or possibly something more if Disney agrees to give Pixar back the rights to its earlier creations, Pixar insists that it will be negotiating with various movie studios before it decides on a film distributor for the future.

Encouraging news to those who believe that Pixar has been dragging its feet in staggering its recent releases 18 months apart, the company is anchoring itself to early summer releases annually now after Pixar and Disney hit the big screen in 2006. While that's still a wider release window than DreamWorks Animation (NYSE: DWA) as the rival computer-animation studio crams at least two new theatrical releases into every year, Pixar keeps doing everything right.

The well-performing Motley Fool Stock Advisor newsletter recommendation has a bright future. In fact, it ought to be in pictures.

Some more recently drawn headlines:

• Pixar sold 5 million copies of The Incredibles the day it came out and has sold millions more since.
• Is DreamWorks or Pixar the best stock to buy for 2006?
• Talk about it all and then some in our Pixar discussion board.

Longtime Fool contributor Rick Munarriz owns all of the Pixar releases on DVD. He owns shares of Pixar too -- and Disney. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.