Nice shot, Marvel Entertainment (NYSE:MVL). The comic-book giant, which has carved out a cozy living licensing stars like Spider-Man and the X-Men, became a superhero itself to its shareholders this morning. The company easily pummeled third-quarter projections and landed a knockout blow by raising its forward guidance.
For the period, net sales rose 14% to hit $92.2 million. Earnings dipped from $0.23 a share last year to $0.16 per share this time around. That kind of margin-tightening is normally looked down on by investors, but it's acceptable in this case, since the top line was inflated by the company moving its licensed toy production in-house for 2006. It may not seem like an overwhelming report, but Wall Street was only looking for $0.12 a share in profitability on $85.5 million in net sales.
Purists may cheer, since this turned out to be the rare quarter in which Marvel's flagship publishing business produced more revenue than its licensing workhorse. In fact, it was the only part of the company to muster improvement in operating income, as licensing and toys slipped for the quarter.
Don't let the lulls dissuade you. This was supposed to be a transitory year. Next year, Sony (NYSE:SNE) will be putting out Ghost Rider and the can't-miss Spider-Man 3. News Corp.'s (NYSE:NWS) 20th Century Fox will also be back to the Marvel film-licensing till when the Fantastic Four sequel, Rise of the Silver Surfer, gets the big-screen treatment. We're also at the start of a five-year toy licensing deal with Hasbro (NYSE:HAS) that should help expand Marvel's global toy shelf reach.
So even if it's encouraging to see Marvel raise its 2006 outlook -- calling for earnings to clock in between $0.61 to $0.64 per diluted share over its initial guidance of $0.50 to $0.60 -- the real meat to Marvel's report is its rather robust net income targets for 2007.
The company is looking to earn $1.35 a share to $1.55 a share next year. Analysts had penciled in the company for just $1.22 a share in bottom-line productivity.
A healthy 2007 would be inspirational icing on this Marvel cake. It, too, may prove a transitory year, since Marvel begins financing its own theatrical productions come 2008. Iron Man and the Hulk will get their box-office moments in May and June of 2008, respectively. With Marvel's more active role in those two productions, the difference between blockbuster and celluloid dud will have a more material impact on the company's financial statements.
Investors have good reason to be encouraged. Marvel shares are up a whopping 349% since being singled out by David Gardner in the summer of 2002 for Motley Fool Stock Advisor newsletter service subscribers.
The prospects for 2008 will ultimately bring out a wide range of skittishness and excitement, but it's great to know that 2007 stands to be one beauty of a diving board.
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Longtime Fool contributor Rick Munarriz enjoyed the Spider-Man and X-Men sequels even more than the originals, but he hasn't been exactly won over by Marvel's other theatrical incarnations. He does not own shares in any of the companies mentioned in this story. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.The Fool has a disclosure policy.
