DreamWorks Shows Improvement Bolstering Outlook for Comcast Deal

DreamWorks posted first-quarter earnings that far exceeded Wall Street estimates, bolstering the outlook for a studio that Comcast agreed last week to acquire for $3.8 billion.

Author:: Leon Lazaroff
Publish date:: May 5, 2016 5:02 PM EDT

DreamWorks Animation (DWA) is operating better than it was a year ago, though only time will tell whether it's worth the $3.8 billion that Comcast (CMCSA) - Get Report said last week to pay to acquire the film and video production studio.

For the moment, Comcast CEO Brian Roberts can be heartened that first-quarter revenue at DreamWorks jumped 14% to $190 million, beating an average analyst forecast of $181 million, according to a Bloomberg survey.

Net income for the quarter tallied $13.8 million, a marked improvement from the same period last year when the company lost $55 million. Earnings per share of 16 cents, handily beat analyst expectations for a profit of just one cent per share. A year ago, DreamWorks recorded a 64 cent loss per share.

Higher revenue at DreamWorks was the product of a major reorganization of the studio begun by CEO Jeff Katzenberg that called for increasing video development -- Awesomeness TV and a variety of productions for Netflix -- while decreasing movie output to two films a year from three.

"I am happy to report another strong quarter of financial results, which I believe reflect continued execution on our strategy of transitioning DreamWorks Animation into a global family entertainment company," Katzenberg said in a statement. "I'm excited to be passing the baton to Comcast, as I know they will continue to build on the foundation we've established over the past 22 years."

Comcast on April 28 agreed to acquire DreamWorks for $41 a share, a 51% premium to where the stock closed prior to news of the merger becoming public. The transaction is expected to close by the end of the year. DreamWorks shares were little changed in after-hour trading after closing Thursday at $39.78

Comcast plans to integrate DreamWorks, the maker of such films as Shrek, Madagascar, Kung Fu Panda and How to Train Your Dragon with its own animation studio, Illumination Entertainment, which is run by Chris Meledandri. Meledandri founded Illumination in 2007 with funding from Universal. He was previously president of 21st Century Fox's (FOXA) - Get Report animation unit Blue Sky.

Comcast is buying DreamWorks to counter Disney (DIS) - Get Report , which has built a global family entertainment empire under CEO Bob Iger. Disney's ability to leverage its film characters into profit at its consumer products and theme parts is the envy of the industry. Roberts views DreamWorks as an important cog in building a family entertainment business to rival Disney.