Can DreamWorks Figure Out Animation?

NEW YORK (TheStreet) -- Four years after the last installment of its runaway-hit Shrek franchise, DreamWorks (DWA) is in need of another animated goldmine. Despite relative critical success, the movie studio's latest kids' flick, Mr. Peabody & Sherman, wasn't it.

In its first quarter ending March, the company recorded a net loss of $42.9 million, or 51 cents a share, compared to profits of $6.1 million, or 7 cents a share, in the year-ago quarter. The results gapped from expectations of a net loss of $13.58 million, or 14 cents a share, according to analysts polled by Bloomberg.

Gross sales for the quarter climbed 9.3% to $147.2 million, higher than analyst estimates of $137.4 million.

A wider-than-expected loss was due to a $57 million impairment charge recorded on the performance of Peabody at theaters globally. The film, based on characters from the 1960s animated TV series Rocky and His Friends, grossed $261 million at the worldwide box office since its release March 7. However, it contributed only $3 million in revenue and remains in an "un-recouped position" with DreamWork's main distributor.

"The box office shortfall of Mr. Peabody & Sherman is evidence of the current challenges we face within our feature film segment, and restoring the strength in our core business is my number one priority today," said CEO Jeffrey Katzenberg in a statement.

A quarter earlier, DreamWorks suffered a drop in profits related to the performance of Turbo in its final months in theaters, a film which saw the studio take a $13.5 million hit to its fourth quarter's bottom line.

Lukewarm reception to DreamWork's latest animated flicks is in stark contrast to the blowout success of Disney's (DISFrozen over roughly the same timeframe. The animated feature, loosely based on Hans Christian Anderson's The Snow Queen, has surpassed every expectation, generating a worldwide gross of $1.14 billion and landing firmly within the bracket of top 10 highest-grossing films of all time.

However, DreamWorks has faith its summer release of How to Train Your Dragon 2, a sequel to the successful 2010 original, will draw a crowd.

"I am confident that its performance will put us back on-track to once again reach the levels of box office success that we've achieved historically," Katzenberg added of the film slated for a June 13 release.

The company also hopes to see a bump in second-quarter profits tied to the release of The Croods into international pay-television markets. The prehistoric comedy released early last year contributed $41.7 million in revenue this quarter, primarily from domestic pay TV and DVD sales.

-- Written by Keris Alison Lahiff in New York.

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