Why DreamWorks Animation Shares Jumped on Friday

By Brian D. Pacampara, CFAFool.com

What: Shares of animation studio DreamWorks Animation soared as much as 18% Friday morning after its quarterly results topped Wall Street expectations.

So what: DreamWorks shares have slumped sharply over the past six months as a string of box-office flops raised plenty of uncertainty over its long-term business model, but better-than-expected Q3 results -- adjusted EPS of $0.02 on a revenue spike of 43% -- are reigniting optimism over its growth trajectory. In fact, revenue at DreamWorks' television segment more than tripled -- due in large part to its partnership with Netflix -- while its consumer products division saw a greater-than-100% jump in revenue, suggesting that results will be a lot less lumpy going forward.

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Now what:Expect DreamWorks to keep lowering its reliance on feature films and, in turn, generate more consistent returns over the long haul. "While we still have considerable work ahead of us, I am proud of the team's collective efforts and remain confident that we are well positioned to meet or even exceed our stated goals for the year while continuing to drive long term value for our stakeholders," said CEO Jeffrey Katzenberg. When you couple DreamWorks' more diversified nature with its still-coolish stock price -- off about 20% from its 52-week highs -- today's pop might just be the start of a long-term rally.

The article Why DreamWorks Animation Shares Jumped on Friday originally appeared on Fool.com.

Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends DWA and NFLX. The Fool owns shares of NFLX. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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