DreamWorks Animation (NASDAQ:DWA) is set to report earnings after the market closes on Tuesday. Here's what you need to watch for in the results.
The immediate question on most investors' minds after earnings come out is: Did the company meet expectations? For DreamWorks, that bar has been set pretty low. Analysts see the company swinging to a loss on the quarter, of $0.03, as compared to last year's $0.29per-share profit. Wall Street also expects the top line to be down for the quarter. Revenue is pegged at $213 million versus the $219 million the company booked in the year-ago quarter.
DreamWorks is up against a tough comparison with 2011. Kung Fu Panda 2 and Puss in Boots pulled in over $1.2 billion at the box office that year, and each received Oscar nominations for best animated feature film. But this year DreamWorks had to watch from the sidelines as rival Disney (NYSE:DIS) basked in the critical praise for its two contenders in the category, Wreck-It Ralph and Brave.
Yes, Dreamworks saw solid box office figures from Madagascar 3 and Rise of the Guardians this year. But that won't be enough to drive improvement over 2011's big haul.
However, DreamWorks isn't completely dependent on box office smashes to keep revenue flowing in. The animator has built up a strong catalog of intellectual property over the years, and it's just beginning to tap into that profit center. In the third quarter, for example, catalog sales chipped in $51 million of revenue, driven by a new content deal with the BBC.
And the company may have found the perfect alternative launch pad for its content in Netflix (NASDAQ:NFLX). DreamWorks just announced plans to create an original series for kids to be aired exclusively on Netflix. The show will be based on DreamWorks' upcoming feature film, Turbo. On Tuesday, investors should get an update on how that content deal will pay out for DreamWorks, and whether we should expect many more like it.
Fool contributor Demitrios Kalogeropoulos owns shares of Walt Disney and Netflix. The Motley Fool recommends DreamWorks Animation, Netflix, and Walt Disney. The Motley Fool owns shares of Netflix and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.