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DreamWorks Animation SKG, Inc. (Nasdaq: DWA): Stock of the Day
Judith Martin, The Investment U Research Team
One o’clock on a Saturday. What to do?
For less than the cost of just one mango margarita, you could be in an air-conditioned theater with friends or family for the matinee showing of a summer blockbuster.
This is where I’ve been most of my summer Sundays, strolling in late to find the theaters already packed. And there’s no company profiting more from my seat-searching stress than DreamWorks Animation (Nasdaq: DWA).
Last year, the company’s animation team wowed audiences of all ages with Madagascar: Escape 2 Africa and Kung Fu Panda, the number one animated film of the year.
This year the company aims to do it again with its newest release, the 3-D animated film Monsters vs. Aliens, featuring the voices of beloved stars Reese Witherspoon, Seth Rogen, Hugh Laurie and others.
So it’s no wonder that as the global media industry experienced revenue growth at an average rate of only 3% over the last year, DreamWorks’ revenues have shot through the roof at a rate of nearly 68%.
Ranked one of Fortune magazine’s 100 Best Companies to Work For in 2009, DreamWorks attracts the best employees in the business. Though small in number (just over 1,700), these men and women have certainly been working hard to earn their keep.
With this year’s ramped up production, DreamWorks has more than doubled its net income compared to this time last year. And the company is just warming up.
DreamWorks is looking at a jam-packed 2010, with three new animated (and 3-D) films poised for release.
The DreamWorks Animation team has also been hard at work this year building promotional alliances with Mc Donald’s, Intel, and Hewlett-Packard, working with Activision to develop video games, designing party favors and greeting cards with Hallmark, and partnering with several other companies to produce toys, mobile phone games, costumes and accessories based on DreamWorks characters.
Not to mention the DreamWorks theme park, character based restaurants, hotels and other tourist attractions scheduled for construction in Dubai.
Of course, with a gross profit margin of 40.9%, this will leave a pile of earnings for DreamWorks’ investors. Analysts expect earnings per share to rise 35% by the end of 2010.
If this seems a little low, it probably is. DreamWorks loves to outperform analyst expectations.
The company has not only beaten EPS estimates by over 20% each quarter in the past year, DreamWorks stunned investors by overshooting investors’ March EPS projection by 46%!
So sit back and enjoy the show, shareholders. With an investment in DreamWorks, you’ll even be able to afford the popcorn.
Good investing,
Judith Martin
Editor’s Note: Dream Works Animation (DWA) should not be confused with the privately owned Dream Works Studios. In a previous iteration of this article this distinction was not as clear as it could have been, and we apologize for any confusion.
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