DreamWorks Animation profit drops 65%

DreamWorks Animation SKG reported a 65% drop in profit in the first quarter, a swing that was the result of not having a major holiday release to power sales at the beginning of the year.

The Glendale animation studio reported net income of $21.7 million, or 24 cents per share, on revenue of $162.1 million for the three months ended March 31. That compared with net income of $62 million, or 71 cents per share, from $263 million in sales in the first quarter of 2009.

Nonetheless, the results exceeded Wall Street’s expectations. Analysts polled by Thomson Reuters projected earnings of 23 cents per share and revenue of $133 million.

“The results were very solid,” said Anthony Valencia, a media industry analyst with TCW Group in Los Angeles. “They continue to prove that they can show regular, positive performance and consistency.”

In a statement, DreamWorks Animation Chief Jeffrey Katzenberg said, “2010 is off to a strong start, thanks in large part to the performance of ‘How to Train Your Dragon.’ ”

He called the studio’s latest film the company’s “next franchise” and announced plans to release a sequel in 2013.

“Dragon” was released March 26, just before the quarter ended. Although the 3-D movie had a weak opening, “Dragon” has gained traction at the box office and benefited from strong reviews, garnering nearly $375 million in worldwide ticket sales to date.

“It did open below our expectations,” Katzenberg told analysts during a conference call, but added: “It’s not where you start, it’s where you finish that matters.”

He said DreamWorks was developing an online virtual world, TV series and live arena show based on the film, reflecting the company’s strategy of leveraging its characters across multiple platforms.

“Dragon” contributed $59.7 million in revenue to the quarter, while last year’s " Monsters vs. Aliens” contributed $24.6 million, mainly from pay television. DVD sales and international TV revenues from the 2008 movies " Madagascar: Escape 2 Africa” and " Kung Fu Panda” added $24.9 million in revenue during the quarter.

DreamWorks’ shares closed Tuesday at $42.36, down 63 cents.

The studio will release two other films this year: the final installment of the Shrek franchise, “Shrek Forever After,” on May 21; and “Megamind,” a spoof on the superhero genre starring comedians Will Ferrell and Tina Fey, on Nov. 5.