WWF Stock a Winner After Earnings Beat Forecasts

Like a skull bouncing off a turnbuckle, shares in World Wrestling Federation Entertainment (WWFE Quote - Cramer on WWFE - Stock Picks) jumped Tuesday after company earnings beat analysts' forecasts for the third quarter by 5 cents.

WWF shares closed up 1 3/8, or 12%, to 13.

The company, powered by strong growth in its TV ratings and advertising and brand merchandising revenue, posted net income of $15.7 million, or 23 cents a diluted share, a 54% increase over its pro forma profit of $10.2 million, or 18 cents a share, a year earlier.

Analysts polled by First Call/Thomson Financial had estimated earnings of 18 cents a share in the latest quarter.

Revenue in the quarter increased by more than 50% to $98.4 million from $65.2 million.

The WWF sold a stake of about 17% in the company in an initial public stock offering in October. Its shares hit $34 after being priced at $17, but have since slumped.

During the quarter, the WWF announced plans for a spring football league, the XFL, which received a bland reception on Wall Street. The company has yet to announce broadcast agreements for the XFL, a key element to its success.

Linda McMahon, the WWF's chief executive and wife of Vince McMahon, the company's outspoken chairman and founder, said the XFL is in active negotiations with a number of TV partners. The league is slated to start in February 2001.

The WWF also announced two British distribution deals during the quarter, one with British Sky Broadcasting and the other with broadcast network Channel 4.

McMahon said she expected to announce its broadcast and cable partners for the league within the next month or so. She added that the new league had secured lease agreements in seven of the eight cities in which it plans to play, including Giants Stadium in East Rutherford, N.J., ensuring its presence in the hugely important New York market.

The WWF sees specific financial benefits from higher TV ratings because, unlike most TV programmers, it sells commercial time for its programming; typically, the networks themselves sell the ad time and collect ad revenues.

McMahon was elusive when asked if the WWF was seeking similarly structured arrangements for its XFL TV partners. "There are many ways to skin a cat," she said.