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Why DreamWorks (DWA) Soared While LinkedIn (LNKD) Bombed

NEW YORK (TheStreet) -- Two media companies -- entertainment giant DreamWorks (DWA - Get Report) and social media player LinkedIn (LNKD - Get Report) -- were at opposite ends of the spectrum on Wednesday.

DreamWorks Animation

DreamWorks Animation soared 17.7% to $32.74 on Wednesday afternoon after its earnings beat expectations. The studio behind Shrek posted third-quarter earnings of 12 cents a share on revenue of $154.55 million. Analysts surveyed by Thomson Reuters expected break-even earnings on $139.53 million in revenue.

"Strength in our feature film segment is the single largest driver of our positive third-quarter earnings," said CEO Jeffrey Katzenberg in a statement. "It also continues to propel new areas of growth for DreamWorks Animation as we have now transitioned into a global, diversified family entertainment company."

Net income dropped 59% year over year to $10 million, due to a lackluster performance for Turbo compared with last year's summer release Madagascar 3. During the quarter, strong pay-TV numbers for Rise of the Guardians contributed $42.5 million, despite its lack of commercial success during a theatrical release in the first quarter.

The company also said it would begin reporting in four separate segments: feature films, television series and specials, consumer products and other. Its feature film segment is the most profitable, contributing 78%, or $120.7 million, to total revenue for the quarter.

For the fourth quarter, the Glendale, Calif.-based company said profits would be primarily driven by feature films and holiday-themed content in its television series and specials segment. Analysts expect earnings of 31 cents a share on $230.06 million in revenue for the seasonally-strong quarter.

TheStreet Ratings team rates DreamWorks Animation Inc as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate DreamWorks Animation Inc (DWA) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and weak operating cash flow."

LinkedIn

LinkedIn shares shed 9% to $224.95 by Wednesday afternoon after issuing muted forecasts for year's end. The professional social network said it expects revenue in the range of $415 million to $420 million for the fourth quarter, $18 million less than expected by analysts surveyed by Thomson Reuters.

Steven Sordello, CFO, said comparatively fewer product launches than the fourth quarter 2012 will yield lower page views.

"At the end of last year, we released more new product than during any similar timeframe in the company's history," he said during a conference call. "Relative to last year's performance, we expect this quarter's sequential page view seasonality to track more closely to what we saw in fourth quarter of 2011."

Despite conservative fourth-quarter forecasts, third-quarter results impressed analysts. Earnings of 39 cents a share beat an expected 32 cents a share, and revenue of $393 million was 56% higher than a year earlier, surpassing estimates by $7.6 million. The Mountain View, Calif.-based company averaged 142 million monthly unique visitors during the quarter, a 30% year-over-year increase.

"Continued innovation in strategic areas such as mobile, students and LinkedIn as a professional publishing platform, as well as ongoing improvements to the core products resulted in increased member growth and engagement," said CEO Jeff Weiner during the call.

TheStreet Ratings team rates LinkedIn Corp as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate LinkedIn Corp (LNKD) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The area that we feel has been the company's primary weakness has been its disappointing return on equity."

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