FBR Analyst Hikes DreamWorks 2016 Estimates Day After Upgrade

• Dreamworks Animation Skg Inc DWA shares have appreciated 24.87 percent over the past three months, from $20.51 on October 14.
• FBR’s Barton Crockett has maintained an Outperform rating on the company, with a price target of $29.
• While recent developments bode well for Dreamworks in the near term, Crockett believes that they would also lead to increased investor confidence in the company’s long term strategy.

Analyst Barton Crockett mentioned that on reviewing FBR’s model for Dreamworks, it became apparent that the 2016 film margin estimate might be too low.

Crockett has earlier estimated the gross margin at the film segment at 15 percent for 2016. However, this segment has delivered gross margins in the range of 32 percent to 36 percent from 1Q15 to 3Q15.

The film segment is expected to benefit in 2016 from Kung Fu Panda 3, scheduled for release on January 29. Therefore, the gross margin estimate for 2016 has been raised to 29 percent, with the EPS estimate going from $0.33 to $0.78 for the year.

In addition, the release of Croods 2 had been expected to impact the company’s 2017 performance. However, with the release date now scheduled for December 22, 2017, Crockett stated that most of the box office and home video collections would be in 2018.

Therefore, the 2017 EPS estimate has been lowered from $1.98 to $1/23, while that for 2018 has been raised from $1.85 to $2.27.