Spidey & Co. Get Stomped

Marvel hits a 52-week low after the company misses estimates and offers a poor outlook.
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Marvel Entertainment

(MVL)

and its stable of superheroes were proving no match for the Big Board's traders, who punished the company's stock after its disappointing earnings and anemic forecast Wednesday.

For the third quarter ended Sept. 30, Marvel's sales fell to $81.1 million from $135.2 million a year ago. The owner of the Fantastic Four, Spider-Man and X-Men brands earned $23.4 million, or 23 cents a share, compared with $34.4 million, or 30 cents a share, last year.

Marvel is projecting 2005 sales of $385 million to $395 million and earnings of $1.02 to $1.07, both ahead of its prior guidance, but the company's 2006 outlook was more horror show than action flick.

Next year, Marvel is expecting to earn 37 cents to 52 cents a share with a top line of $270 million to $300 million, both of which fall significantly short of Wall Street's consensus estimates. The company said the prediction "reflects a difficult year for both toys and licensing."

Analysts were looking for a profit of 30 cents and revenue of $100.3 million for the third quarter. Thomson First Call carries consensus estimates for 2005 of $1.08 a share in earnings and $388 million in revenue. For 2006, the average analyst target is for earnings of $1.13 a share and revenue of $415.5 million.

Shares of Marvel were plunging $3.70, or 20.5%, to a 52-week low of $14.34. Volume was 10 times the daily average for the last three months.

Marvel also said its board approved an additional $250 million share repurchase authorization. The company secured a $150 million line of credit from HSBC, of which $125 million will be available, along with its cash from operations, for repurchasing stock.

The buyback will "provide a very attractive long-term return on investment as we proceed beyond 2006," Marvel said. The optimism comes from the fact that in 2007, Marvel will release "Spider-Man" and "Fantastic Four" sequels, while in 2008 it will launch its own film slate.

The company said in September that it would finance the production of up to 10 films based on characters from its comic books. Paramount, a unit of

Viacom

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, will distribute the films. The first theatrical release is expected in the summer of 2008, the company said at the time.

Marvel will have complete creative control and greater profit potential than it has had with previous licensing deals. In the past, Marvel has licensed its characters to Sony Pictures, 20th Century Fox and New Line Cinema, among others.

The 2006 outlook factors in expected nominal contributions from the feature films "X-Men 3", "Ghost Rider" and "The Punisher 2," modest initial input from the animated projects "Avengers 1" and the "Fantastic Four" television series in Europe, and no assistance from the Spider-Man limited partnership.