BANGALORE (Reuters) - Marvel Entertainment Inc MVL.N, which licenses comic-book characters, posted a better-than-expected quarterly profit, helped by Spider-Man 3 merchandise licensing, and forecast a strong 2008, sending shares up almost 22 percent.
The company, which houses a cast of more than 5000 characters including The Incredible Hulk and X-Men, was also helped by worldwide licensing revenue and growth in its publishing segment, which prints several popular comic-book titles. Marvel also raised its outlook for 2007.
Morgan Joseph analyst David Kestenbaum called the results “spectacular,” noting the company’s higher-than-expected revenue from Spider-Man 3 merchandise led to the outlook hike.
There have been concerns that Marvel, which licensed theatrical character rights for Spider-Man to Sony Corp (SNE.N) (6758.T), might run out of steam after revenue fueled by the Spider-Man 3 film recedes. The stock has dropped more than 8 percent since hitting a year-high of $30.95 in late February.
Marvel spokesperson David Collins acknowledged that Spider-Man 3 had made a “major contribution” so far this year, but said the company expects ongoing growth in its core businesses.
“Spider-Man is an evergreen property,” Lehman Brothers analyst Eric Handler said, noting the company will continue to benefit from Spider-Man licensing, toys and television series.
Marvel expects 2008 earnings of $1.30 to $1.50 on net sales of $360 million to $400 million. The forecast does not include potential revenue and costs from its forthcoming self-produced films.
Analysts on average expect $1.34 a share on revenue of $478.9 million, according to Reuters Estimates. The company expects revenue of $100 million to $160 million from each of its two expected films slated to hit celluloid screens in mid-2008.
Handler said the 2008 outlook eased concerns about Marvel’s core businesses, licensing and toys.
SPIDER-MAN DOES IT
Analysts were surprised by the third-quarter results, which beat Wall Street’s view by about 16 cents in spite of including benefits from an audit claim.
Net income for the third quarter was $36.3 million, or 45 cents a share, while net sales came in at $123.6 million.
Analysts had expected 28 cents a share on revenue of $90.52 million.
Net sales at the licensing segment, which benefited from strong contributions related to Spider-Man 3 consumer merchandise licensing, more than doubled, while sales at the publishing segment jumped 13 percent.
“The publishing segment continues to benefit from strong sales of event-driven imprints such as World War Hulk and Stephen King’s Dark Tower series,” Marvel’s chairman, Morton Handel, said in a statement.
For 2007, Marvel sees earnings of $1.60 to $1.65 a share on revenue of $455 million to $475 million. It had earlier forecast earnings of $1.30 to $1.55 a share on revenue of $375 million to $435 million.
Analysts on average were expecting a profit of $1.44 a share on revenue of $431.8 million.
SELF-MADE IRON MAN
Investor eyeballs are set on Marvel’s progress in producing films based on the Iron Man and The Incredible Hulk characters through its own movie unit. The movies are Marvel’s first venture into making feature films on its own.
Marvel has completed principal photography for Iron Man and started principal photography for The Incredible Hulk.
“Considering their track record, it’s hard to bet against them,” Morgan Joseph’s Kestenbaum said. But he added each film will have to make more than $150 million domestically to make a meaningful profit.
RBC Capital’s David Bank said he does not expect the films to be blockbusters, but expects $250 million in domestic box office from both the films.
Hasbro Inc HAS.N, which has a tie-up with Marvel, will roll out toys tied to Iron Man and The Incredible Hulk films in 2008.
Shares of New York-based Marvel rose to an intraday high of $28.35, before falling back to trade up $4.79 at $28.10 in afternoon trade on the New York Stock Exchange.
Additional reporting by Ankur Relia