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Why Dreamworks Animation Skg Inc Shares Soared

By Brian D. Pacampara, CFA – Feb 24, 2016 at 3:58PM

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The animation house posts blowout Q4 earnings and revenue.

Source: Dreamworks

What: Shares of animation studio Dreamworks Animation (DWA) were up 17.5% at 11:25 a.m. EST on Wednesday after its quarterly results easily topped Wall Street expectations.

So what: Dreamworks shares have slumped during the past month on concerns over slowing box-office revenue, but stellar Q4 results -- EPS of $0.55 smashed the consensus by $0.39 on soaring revenue growth of 36% -- are quickly easing those worries. While Dreamworks has certainly been trying to lessen its reliance on blockbuster movies, revenue at its feature-film segment -- which still accounts for the majority of business -- rose 11.5%, to $146.4 million on the strength of Kung Fu Panda 3, suggesting that the company's restructuring process is a lot less painful than analysts had predicted.

Now what: Expect management to continue diversifying DreamWorks into a "global family entertainment brand," with a particularly increased emphasis on developing TV shows. "While there is still much work to be done before we cross the goal line on the objectives we shared a year ago, we enter 2016 with considerable momentum," said CEO Jeffrey Katzenberg. "Our continued focus on executing on our strategic goals will not only ensure sustainable and profitable growth over the long term, but create shareholder value for years to come." Of course, with the shares still off about 15% from their 52-week highs, management still has some work left in convincing Mr. Market. 

Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends DreamWorks Animation. 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.

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