DreamWorks Swings on Analyst Outlook

NEW YORK ( TheStreet) -- DreamWorks ( DWA) shares have rebounded after earlier declines that were spurred by several analysts slashing their fourth-quarter earnings estimates lowering their price targets on the stock.

Analyst Barton Crocket with Lazard Capital cut his fourth-quarter earnings estimate to 53 cents per share from his previously expected 90 cents a share as he expects weak DVD sales.
Shrek Forever After

Crockett believes that DVD sales of the fourth Shrek movie, Shrek Forever After, faltered in the fourth quarter in a competitive movie market that is "unforgiving of second-tier titles."

He lowered his fourth-quarter Shrek 4 DVD unit sales estimate to 4 million from his previous projection of 9.9 million and trimmed his How to Train Your Dragon DVD unit sales estimate to 8.4 million from 9.4 million.

He also attributed his lowered earnings estimates to Megamind's "disappointing performance."

"With the domestic run nearly done and the bulk of international markets launched, it's clear that Megamind underperformed," Crockett stated in his Jan. 7 research note.

"With tepid reviews and a weak DVD market, we assume only 2.9 million Megamind DVD units sold in the first quarter of 2011."

He is expecting the company to report a loss of $47 million in the fourth quarter on the movie's weak results.

Crockett also cut his 2011 earnings estimate to $1.40 a share from his previous $2.23 a share.

He gives DreamWorks a hold rating but believes that as 2012 approaches, investor confidence may grow on a distribution deal renegotiation with Viacom's ( VIA) Paramount.

He also believes that the company could benefit as a leading content supplier if 3D home video gains traction.

Analyst Tony Wible of Janney Capital Markets also lowered his outlook on the movie company recently, dropping his fourth-quarter earnings estimate to 76 cents from 88 cents a share.

He cut his 2011 earnings estimate to $2.31 from $2.69. He gives DreamWorks a hold rating with a lowered price target of $31, down from his previous projection of $40.

The company is scheduled to release its fourth quarter earnings report on Feb. 23 after the market closes. Analysts estimate earnings will come in at 82 cents a share.

DreamWorks shares have been trading below $30 recently, on the lower end of the stock's 52-week price range of $26.61 to $44.77. Shares fell to $29.29 today but have since recovered to advance 0.07% to $29.65.

-- Written by Theresa McCabe in Boston.

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