Marvel Q2 earnings trail Wall Street, shares down

By John Tilak

BANGALORE (Reuters) - Marvel Entertainment Inc. (MVL.N), which licenses comic book characters, reported lower-than-expected quarterly earnings and cut its toy-sales forecast for the second half of the year due to possible lower reorders from toy maker Hasbro Inc. (HAS.N).

Shares of New York-based Marvel, which boasts a stable of more than 5000 characters including Spider-Man, The Incredible Hulk and X-Men, dropped more than 5 percent in afternoon trade.

Marvel shares had slid about 11 percent since the beginning of the year before Tuesday's losses. Investor fears have been stoked by doubts about the company's ability to maintain earnings growth after revenue from Spider-Man ebbs.

The company reported second-quarter earnings of 34 cents a share versus Wall Street expectations of 39 cents a share, excluding items.

Net sales rose about 20 percent to $101.5 million, but trailed market expectations of $109.3 million.

TOY TROUBLE

Marvel reduced its toy-sales forecast for the second half of 2007 to the low end of Hasbro's forecast to reflect the possibility of lower reorders, Chief Financial Officer Kenneth West said in a conference call.

Last year, Marvel shook hands with Hasbro on a five-year master toy licensing deal, giving the world's No. 2 toy maker the right to produce toys and games based on Marvel's crop of characters.

Marvel's characters are vying with more competitors for shelf spaces in toy stores as there are more "toyetic" films that can be exploited by toy sellers, Stifel Nicolaus analyst Drew Crum said by phone.

Last month, "Transformers," a movie based on 1980s toys, raked in a record $152.6 million in its first seven days after release. The film was co-produced by Paramount and DreamWorks, which are part of Viacom Inc. (VIA.N).

Marvel's second-quarter toy segment revenue fell about 24 percent to $19.3 million, which makes up about one-fifth of total sales.

"The shares are reflecting a little bit of a pull-back in toy sales, expectations, (especially) Spider-Man," Janco Partners Inc. analyst Mike Hickey said by phone.

Marvel company spokesman Richard Land said the company would not provide any figures about the toy sales outlook cut.

However, the company reiterated its overall outlook for 2007 as it hopes the lower toy sales would be offset by greater contributions from both its international licensing and publishing segments in the second half of the year.

WEAK SUPERHEROES?