DreamWorks Advances Most in Year on ‘Madagascar 3’ Sales

DreamWorks Animation SKG Inc. (DWA), the studio that produces the “Madagascar” film series, rose the most in a year in New York after third-quarter sales and profit beat analysts’ estimates.

The shares advanced 6.7 percent to $21.99 at the close to mark the biggest gain since Nov. 7, 2011. The stock has risen 33 percent this year.

The studio released “Madagascar 3: Europe’s Most Wanted,” in June. The third film in the series about wayward zoo animals has collected $717 million in worldwide revenue, according to Box Office Mojo, a film researcher. Sales outside the U.S. totaled $503 million, DreamWorks Animation said.

“The company posted a solid quarter after several disappointments,” said Paul Sweeney, North American research director for Bloomberg Industries. “At the end of the day for this company, it is about generating a steady stream of hits.”

Third-quarter net income rose 24 percent to $24.4 million, or 29 cents a share, from $19.7 million, or 23 cents, a year earlier, the Glendale, California-based company said yesterday in a statement. Analysts projected 11 cents, the average of 10 estimates compiled by Bloomberg. Sales rose 16 percent to $186.3 million, exceeding projections of $136.1 million.

DreamWorks Animation’s second movie of 2012, “Rise of the Guardians,” opens in theaters on Nov. 21. The film features voices of Hugh Jackman and Alec Baldwin.

Expansion Effort

Chief Executive Officer Jeffrey Katzenberg is seeking to broaden the company’s revenue beyond two to three film releases a year and library sales. He’s opening an animation studio and live entertainment venture in China and a theme park in New Jersey. He’s also expanding the studio’s cast of characters with the August purchase of Classic Media, owner of Casper the ghost and Rocky the flying squirrel.

In August, Katzenberg struck a new film distribution accord with News Corp. (NWSA)’s Twentieth Century Fox, replacing one with Viacom Inc. (VIAB)’s Paramount Pictures. The accord lowered the company’s costs for video-on-demand and allowed it to keep revenue from domestic television, such as sales to Netflix Inc. (NFLX)

Sound System

DreamWorks Animation also said yesterday it agreed to make its next 15 animated movies using Barco NV (BAR)’s 3-D sound format.

The agreement will begin with “Rise of the Guardians,” the companies said in a statement.

Studios and technology companies are developing new sound systems to draw a clearer distinction between theaters and home viewing. The Barco system distributes the soundtrack to speakers set at three heights in the theater to provide a more natural sound, the companies said.

Dolby Laboratories Inc. (DLB)’s competing system called Atmos has been featured in some films including “Brave,” from Walt Disney Co.’s Pixar.

To contact the reporter on this story: Michael White in Los Angeles at mwhite8@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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