Pixar Keeps Performing

Animation company Pixar released earnings last night, and the profits easily surpassed the estimates yet again. For a company that is supposed to be in a lull before its next major movie is launched, Pixar is looking quite strong. Strong non-box-office business, including DVD and video sales and merchandise royalties, are powering earnings growth at the company.

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By Paul Larson (TMF Parlay)
August 10, 2001

Animation company Pixar's (Nasdaq: PIXR) streak of easily beating analysts' profit estimates is unbroken. Last night, the company responsible for such theatrical hits as Toy Story and A Bug's Life reported earnings per share of $0.17 for the second quarter, easily besting the mean analyst estimate of $0.13. Pixar, according to First Call data, has smashed through Street estimates for more than two years running.

Revenue in the second quarter amounted to $16.7 million, down slightly from the $18.3 million recorded in last year's quarter when Toy Story 2 was still in a handful of theaters. Operating profits were roughly flat with last year ($10.3 million this year versus $10.5 million last), and net income actually rose a tad to $8.8 million versus the $8.0 million earned last year.

These results are quite impressive since the company's last movie, Toy Story 2, was released in November 1999, nearly two full years ago. For a company whose financial results are supposed to resemble spikes and valleys -- spikes in the years movies are released, valleys when no new offerings hit the theaters -- Pixar has shown some amazing earnings strength during the relative low periods.

Part of this is because the company's portfolio of movies is proving to have an "evergreen" appeal. The revenue generated from each film only begins once it is released into the theater. After collecting box-office royalties, Pixar also collects revenue from DVD and video sales, merchandise royalties, and the licensing of its movies for pay-per-view and network viewings. In fact, a decent chunk of this quarter's revenues came from a television licensing deal for A Bug's Life with ABC, owned by Pixar's marketing partner Disney (NYSE: DIS).  

Pixar also yet again raised its earnings guidance for the balance of the year. After the first quarter, the company ratcheted up its projections for year 2001 profits to the $0.40 to $0.55 range. Now Pixar is saying it should earn between $0.50 and $0.58 for the full year.

Of course, the financial fireworks should really begin in the first quarter of next year when revenue from the company's newest film, Monsters, Inc. -- set to be released this November -- starts to roll in. For now, though, the so-called "slow" times at Pixar are looking quite solid.

Paul Larson owns all of Pixar's movies in his small DVD collection. He also owns shares of the company's stock. You can see Paul's other holdings online. The Motley Fool is investors writing for investors.