LOS ANGELES Shares of DreamWorks Animation SKG Inc DWA.N rose over 8 percent on Tuesday, one day after the maker of animated feature films announced a share repurchase program.
DreamWorks' board on Monday authorized the program to buy back $150 million of the company's outstanding shares of Class A common stock.
DreamWorks shares rose 9.1 percent, or $2.08, to $25.03 on the New York Stock Exchange.
Drew Crum, analyst with Stifel Nicolaus, said he believed the buyback reflected confidence by DreamWorks regarding "cash collections" related to its "Shrek the Third" DVD, released on November 13 in the U.S. into a highly competitive fourth quarter for home video releases.
"They had $540 million in cash on their balance sheet when they exited the third quarter, so the release of 'Shrek The Third' should supplement the company's current cash balances despite underperforming 'Shrek 2'," he said.
"Management was cautious ahead of the holiday season due to what is perceived as a highly competitive market," said Crum.
"According to industry data, sell-through of 'Shrek the Third' has been about 7 million units in the U.S. to date," he said.
He noted that DreamWorks shipped about 30 million units of "Shrek 2" in 2004. A spokeswoman was not immediately available to comment on how many units of "Shrek the Third" had been shipped.
(Reporting by Sue Zeidler, editing by Phil Berlowitz)