'Iron Man' Lifts Marvel Entertainment's 3Q Profits
Strong box office receipts for the film "Iron Man" lifted Marvel Entertainment Inc.'s third-quarter earnings 39 percent, according to a report Tuesday from the movie, licensing and comic-book publishing company, which also raised its full-year forecast for 2008.
The company said several factors would be at play in 2009. A larger-than-expected portion of "Iron Man" revenue will be realized this year instead of next, having been paid early by the distributor. The company won't be releasing a summer feature in 2009 and it expects Spider-Man-related sales to weaken. Executives also worry that licensees may not get financing to manufacture its character-driven merchandise.
Shares fell $1.91, or 6.2 percent, to $28.97 in midday trading.
Peter Cuneo, Marvel's vice chairman, said the company hasn't seen a "material" impact from the slowing economy.
"When times are tough, people like to escape," he told analysts in a conference call Tuesday.
But the global downturn is unprecedented, and "it would be prudent for us to be cautious," Cuneo said.
For the three months ended Sept. 30, New York-based Marvel earned $50.6 million, or 64 cents per share, compared with $36.3 million, or 45 cents per share, a year earlier. Revenue grew 48 percent to $182.5 million -- including about $60 million in earlier-than-expected "Iron Man" revenue -- from $123.6 million last year.
The results easily beat the average estimates of analysts polled by Thomson Reuters, who had forecast a profit of 45 cents per share on revenue of $146.1 million.
"Iron Man," starring Robert Downey Jr. as the title character, grossed $318.3 million in the U.S., according to Media By Numbers LLC in Encino, Calif. The movie ranks among the 25 top-grossing U.S. films of all time.
Marvel produced the movie. It was distributed by Paramount Pictures, which is owned by Sumner Redstone's media conglomerate Viacom Inc.
Marvel's film production sales totaled $90.2 million in the third quarter -- including the box office take for "Iron Man," fees for serving as a producer for that movie and "The Incredible Hulk" and foreign DVD pre-sales for "Iron Man," which was released on DVD on Sept. 30.
"Iron Man" and "Hulk" were the first two movies Marvel produced, an arrangement that brings it more revenue than when it licenses movie rights to third-party producers.
The company had no film production sales a year earlier.
Marvel said DVD sales and rentals for "Iron Man" grossed $175 million as of Nov. 2, excluding five foreign regions where DVD rights were prearranged and the U.K., where reporting was slower. "The Incredible Hulk" grossed $69 million in DVD sales in the same period.
"Iron Man and Hulk DVD sales are really strong. This is happening while the consumer is freaking out," said Michael Pachter, an analyst at Wedbush Morgan. "People will really spend money to escape."
Other segments of Marvel's business softened. Licensing fees fell 29 percent to $58.1 million in the quarter as Spider-Man licensing and merchandise revenue weakened. Publishing sales slipped 3 percent to $34 million, on weakness in trade paperback and custom publishing.
Based on the stronger-than-expected film production revenue, Marvel raised its 2008 outlook to between $2.45 and $2.65 per share on revenue of $640 million to $670 million, from prior estimates of $1.55 to $1.75 per share on revenue of $450 million to $480 million. The new guidance is well above analysts' average forecast of $1.93 per share in earnings and revenue of $527.9 million.
For 2009, Marvel forecast earnings per share of $1 to $1.35 on revenue of $415 million to $460 million. Analysts had projected earnings of $1.94 per share on revenue of $617.8 million.
Marvel said that while its core licensing business continues to grow, the timing of its films and related revenue leads to variability in operating income.
Marvel's next feature films, "Iron Man 2" and "Thor," are slated for release in summer 2010, with "The First Avenger: Captain America" and "The Avengers" to be released the following year.