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February 24, 2009
Dreamworks Animation Earnings Preview
Several of Northlake's long positions report this week beginning tonight with Dreamworks Animation (DWA). DWA has been very weak as the collapse in DVD sales has crushed estimates and compacted long-term valuation. However, the stock may be a good setup for a rebound. Getting past the earnings report could allow investors to look forward where the outlook is more hopeful.
Consensus is for 60 cents in EPS on $232 in revenue. DWA's earnings are tough to predict due to limited revenue streams against mismatched timing of expenses. The revenue number looks a little high to me while the EPS number seems OK even on lower revenues. EPS estimates were 83 cents when the company last reported which tells me bias on tonight's report should be for below consensus.
The optimistic case looking ahead is that the company has a movie coming on March 27th, Monsters vs. Aliens, profitable DVD sales on that film and Madagascar 2 later this year, and three films to be released in 2010 including Shrek 4. DWA shares usually perform better in anticipation of movies than in reaction to movies.
The trade is that we are moving into an anticipation period with the stock and estimates reflecting a lot of bad news and negative sentiment.
Posted by Steve Birenberg at February 24, 2009 10:49 AM in DWA
WHAT DO YOU THINK OF CETV'S EARNINGS REPORT FOR THE QUARTER?
Posted by: MP at February 25, 2009 08:41 AMThe quarter was pretty good given what the company is facing. The bullish view would be that they managed well in 4Q which proves they can manage well in 2009 which is going to MUCH MUCH tougher.
On the call, they admitted that current ad sales are minimal and they have no visibility. They also made the point that they have lots of cost cutting.
I came away from the call a lot more cautious and have been selling some stock. I worry that the outside pressures on the company overwhelm all of the good work the company is doing. But moslty I worry that the macroeconomic headwinds could still get worse and if that happens there is not much more the company can do.
Long-term value remains immense but that may not prevent the stock from going even lower first.
Posted by: Steve at February 25, 2009 11:18 AM