DreamWorks Animation's Ogre Eats Up Expectations

"Shrek Forever After" gave DreamWorks Animation an ogre-sized boost in the third quarter.

Shrek Forever After
Shrek Forever After

The animation studio's earnings per share surged to 47 cents, compared with the 35 cents analysts were expecting and the 23 cents per diluted share in the year-ago period. Revenue rose 39.4 percent to $188.9 million. The majority of that revenue—$120 million—was from the theatrical release of the fourth movie in the Shrek franchise.

The DVD for "How to Train Your Dragon" just hit stores on October 15, and CEO Jeffrey Katzenberg says early performance has been "very strong."

He won't predict how it will fare over the life of the DVD's sales, but the fact that it will be on store shelves for so long before holiday shopping starts means that it will likely have a different sales pattern than the DVDs they have released closer to Christmas.

Ideally, the extra time on shelves, and the pairing with Shrek 4 DVDs, which will hit shelves right in time for holiday shopping, will help.

Tuesday afternoon, Standard & Poors reiterated a "Strong Buy" rating on DreamWorks and increased its target price by $4 to $44. S&P said in a note:

"With Shrek 4's highly anticipated home video debut now set for December 4, we also see DVD sales of How to Train your Dragon gaining some traction as the holiday season approaches, while remaining cautiously optimistic on the Nov. 5 theatrical release of Megamind," the note read.

DreamWorks is the first of the movie studios to report quarterly earnings—the numbers bode well for consumers' willingness to spend on entertainment.

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