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'Kung Fu Panda' to drive DreamWorks Animation third-quarter results

October 27, 2008 | 12:18 pm

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One of the things about being a small Hollywood studio is that results swing heavily based on the performance of single film. That will be amply demonstrated Tuesday when DreamWorks Animation SKG releases its third-quarter earnings.

"Kung Fu Panda," which was released in June, has become one of DreamWorks' most successful movies, generating $630 million in worldwide ticket sales. The movie's box-office performance -- it hasn't come out on DVD yet -- has prompted some analysts to raise DreamWorks earnings estimates for the year.

But as good as it is, "Kung Fu Panda's" performance won't be enough to overcome unfavorable comparisons, thanks to the even better showing of "Shrek 3" in the same period last year.  As a result, net income for DreamWorks Animation is expected to decline 34% to 31 cents a share, while revenues are forecast to drop 19% to $130 million, according to analysts polled by Thomson/First Call.Ctlogo

Despite the mayhem on Wall Street, however, analysts generally are upbeat about DreamWorks' outlook, viewing the company as less vulnerable to an economic downturn because, unlike some of the larger studios, it doesn't have any major advertising-supported businesses. And they have high hopes for "Madagascar: Escape 2 Africa,"  which debuts Nov. 7. Wedbush Morgan Securities analyst Michael Pachter predicts the "Madagascar" sequel will do nearly $450 million in worldwide ticket sales.

"I think they will do well in the economic downturn," Pachter said.

To be sure, DreamWorks faces challenges. The studio has banked heavily on 3-D technology, which has been slow to take hold in theaters.  And DreamWorks has yet to match the track record of its rival, Walt Disney's Pixar Animation Studios, which scored its ninth consecutive critical and commerical hit this summer with "Wall-E." (Disney's in-house animated feature, "Bolt," hits theaters Nov. 21.)

"Kung Fu Panda was very successful,'' said Doug Creutz, a media analyst with Cowen & Co. "The key for them is to show that they can do that consistently and not just once every few years."

--Richard Verrier

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