DreamWorks Declines on Forecast of ‘Turbo’ Writedown

DreamWorks Animation SKG Inc. fell 4.5 percent after an analyst predicted a writedown of as much as $50 million on the new movie “Turbo,” citing a disappointing opening at the box office.

DreamWorks Animation, based in Glendale, California, declined to $23.77 at the close in New York. Shares of the independent film studio, which fell 6 percent on July 16 as analysts lowered estimates for “Turbo” in its debut, have advanced 43 percent this year.

With sales of $21.5 million this past weekend, “Turbo” may not reach $100 million during its run in U.S. and Canadian theaters, James Marsh, a Piper Jaffray analyst in New York, wrote today in a research note. The film had a slower start than “Rise of the Guardians,” DreamWorks Animation’s November 2012 release that opened with $23.8 million and led to an $87 million writedown.

“While reviews have been positive for the film and could help build word of mouth, at this stage we think it will be lucky to hit $100 million in the current competitive environment,” Marsh wrote.

The analyst, who previously had estimated a $140 million total domestic take for “Turbo,” dropped his forecast for international receipts to $225 million from $260 million.

Opening-weekend figures don’t reflect the movie’s potential, particularly in markets outside the U.S., Allison Rawlings, a DreamWorks Animation spokeswoman, said in an interview. “Turbo” has yet to open in Europe, Korea and China. The film opened on a crowded weekend with four new movies plus the animated holdover hit “Despicable Me,” she said.

‘Too Early’

“It’s certainly too early to tell” about the movie’s performance, Rawlings said. “The film resonates really well with our core audience.”

“Turbo” won a top “A” rating from CinemaScore, a Las Vegas-based research firm that asked audience members to grade movies from “A” to “F” after seeing them on opening day.

Since the July 17 opening, “Turbo” has generated an estimated $31.2 million at domestic theaters, according to researcher Box Office Mojo. Benjamin Mogil, an analyst at Stifel Nicolaus & Co., had originally estimated $40 million at this point.

Fox, Merchandise

Merchandising and better terms with new distributor 21st Century Fox Inc. may help DreamWorks Animation avoid a writedown on the scale of “Guardians,” Piper’s Marsh wrote. That movie generated $303.1 million worldwide, including $103.4 million domestically, according to Box Office Mojo.

DreamWorks Animation signed a five-year film distribution agreement with Fox last August, ending a six-year pact with Viacom Inc.’s Paramount Pictures. The Fox deal allows DreamWorks Animation to keep rights to domestic television revenue and provides lower digital distribution costs.

Merchandising for “Turbo,” about a speedy snail who aspires to compete in the Indianapolis 500, will benefit from cross-promotion with a planned television show based on the characters that will appear on Netflix Inc.’s Web-based subscription service, Marsh said. The movie also will appear on Netflix.

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