Not so iron, man: Marvel's shares tumble on 2008 outlook
Marvel Entertainment Inc. may have to send Tony Stark back to the lab: The company’s latest financial outlook didn’t cut it with investors.
New York-based Marvel, whose spring movie hit "Iron Man" featured Robert Downey Jr. as the scientist-genius-egomaniac Stark, today reported a 60% jump in second-quarter profit, thanks mainly to a surge in revenue from licensing of merchandise tied to "Iron Man" and others in Marvel's large cast of characters.
But Wall Street focused on the company’s revised revenue and profit forecasts for 2008. Although Marvel boosted its revenue estimate for this year to a range of $450 million to $480 million, an increase of 20% from its May forecast, analysts’ consensus was for $516 million, according to Bloomberg data.
The company’s new 2008 earnings forecast -- a range of $1.55 to $1.75 a share -- also was below analysts’ consensus estimate of $1.90.
Given the big rally in Marvel’s stock in spring on the box-office success of "Iron Man," maybe investors were just looking for an excuse to bash the shares. In any case, they did: The stock slumped $4.07, or 11.5%, to $31.19, though the price still is up almost 17% year to date.
Hollywood accounting being what it is, Marvel didn’t record any domestic revenue for "Iron Man" or its other flick, "The Incredible Hulk," in the second quarter. It did however, record $28.9 million in revenue for foreign pre-sales of the movies.
What seems to have unnerved investors was the company’s warning that the domestic payoff from the films, including DVD sales, won’t come until 2009 -- after Marvel's distributors have subtracted promotional costs.
Investors were drawn to Marvel shares in the first half of this year on excitement about the company’s decision to begin producing its own films (starting with "Iron Man") as opposed to letting other studios reap the rewards (as Sony Corp. has done with Marvel’s "Spider-Man" franchise).
Long-term optimism about the film business may still be there, but Marvel today essentially warned investors they'd have to be patient.
In this market, that’s asking a lot.
Photo: "Iron Man." Zade Rosenthal / Marvel Entertainment
