February 24, 2009 / 5:49 PM / 10 years ago

UPDATE 4-Marvel quarterly profit tops Street, shares soar

* Q4 EPS 80 cents beats Street by 8 cents

* Expects licensing revenue to fall in 2009

* Reiterates outlook for 2009

* Spider-Man musical to release in Feb 2010

* Shares rise 17 percent (Adds Marvel executive interview)

By S. John Tilak

BANGALORE, Feb 24 (Reuters) - Media company Marvel Entertainment Inc’s MVL.N profit more than doubled, beating market estimates for the sixth straight quarter, as it benefited from the strong performance of its first self-produced films, sending its shares up as much as 17 percent.

The company — whose businesses include publishing, licensing and movies — started making its own films last year with the hugely successful “Iron Man,” which was followed by “The Incredible Hulk,” creating a new revenue stream.

“Iron Man,” which was distributed by Viacom Inc’s VIAb.N Paramount Pictures, had the second-biggest non-sequel box office opening in history. It was the second-most successful film of 2008, after “The Dark Knight.”

“The fact that they came in at their guidance range is a great sign that their business is much better than people feared with an economic downturn,” Wedbush Morgan Securities analyst Michael Pachter said.

The results show that Marvel, which reiterated its outlook for 2009, is in good shape to hit the high-end of their outlook for 2009, Pachter said.

Its fourth-quarter net income rose to 80 cents a share, from 35 cents a share a year ago. Revenue more than doubled to $224.3 million. Analysts were looking for $220.6 million, according to Reuters Estimates. [ID:nWNAB6020]

It recorded film-production revenue of $135.5 million, mainly from DVD sales of “Iron Man.” Revenue from its publishing segment grew 9 percent to $33.1 million.

“Our financial results from the films were in excess or in line with our expectations,” said Robert Steffens, Marvel’s senior vice president, financial analysis.

Last week, the company said toymaker Hasbro Inc HAS.N will retain toy-licensing rights for its characters until 2017 in a deal that guarantees Marvel $100 million in royalties and gives it the potential to earn up to an additional $140 million.


Marvel, which boasts a stable of more than 5,000 characters including Spider-Man and X-Men, continues to see a sharp decline in 2009 earnings and revenue, hurt by a lack of self-produced movies, which helped it garner a greater share of profits than when it licensed its comic-book characters to others.

News Corp’s (NWSA.O) 20th Century Fox will launch “X-Men Origins: Wolverine”, a movie based on Marvel characters, in May.

“Clearly Wolverine doesn’t drive our business to the extent that our own films do or as Spider-Man does. But it is something that is important for us next year,” Steffens said.

Revenue from its licensing segment is expected to drop in 2009, reflecting a $50 million fall in licensing revenue related to Spider-Man L.P., a joint venture between Marvel and Sony Pictures.

Marvel has licensed theatrical rights of Spider-Man, its most popular character, to the unit of Sony (6758.T) (SNE.N).

The segment will also be hurt by lower domestic and international licensing revenue as Marvel will not have any of its own film releases during the year.

The company, however, said it expects to recognize the majority of the home video sales of “Hulk” in 2009.


Investors are already setting their eyes on 2010, when Marvel will release two more self-produced films — an “Iron Man” sequel and “Thor.”

“The profitability they generated in 2008 is a very good signal that they could be at least that profitable in 2010, if not more so,” Wedbush’s Pachter said.

Pachter expects the sequel to do as well as the first movie. “‘Iron Man’ was a good movie. ‘Iron Man 2’ will be a good movie. People pay for things that are good.”

Marvel’s Steffens said he was very optimistic about the potential from “Iron Man” licensing in 2010. “So we expect licensing in 2010 to be strong.”

The “Spider-Man” musical is expected to launch in February 2010 and contribute to revenue in the same year. “We do not bear any of the costs. We have a dollar one gross deal that we are happy with. So we will definitely see a (positive) revenue impact in 2010,” Steffens said.

The “Spider-Man” musical will be directed by Julie Taymor, the director of “The Lion King” musical, while its music and lyrics are being created by U2’s Bono and The Edge.

Marvel shares were up 14 percent, or $3.44, at $27.36 in midday trade on the New York Stock Exchange.

The shares have lost about 38 percent since hitting an all-time high of $38.50 in September, while the S&P 1500 Movies & Entertainment sub-industry index .15GSPENTE has shed 51 percent.

Marvel stock is trading at 9.2 times forward earnings, trailing the movies and entertainment sector, which is trading at a multiple of 13.1 times. (Editing by Vinu Pilakkott, Himani Sarkar)

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