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AMC Profits Dented by Costs to Find Next ‘Walking Dead’

The zombies are eating into AMC Networks Inc.’s profits.

The cable-channel owner, whose flagship network is home to “The Walking Dead,” missed first-quarter profit estimates as costs rose to create and market its original programs. The shares fell the most in 33 months.

The profit shortfall reflects the investments AMC is making in new programs to keep building its audience after gaining viewers with shows like “Mad Men” and “Breaking Bad.” A related series to “The Walking Dead,” the No. 1 program among viewers age 18 to 49, is among AMC’s new projects, along with a “Breaking Bad” spinoff.

Leaving out an amortization charge, earnings of $1.04 a share compared with the $1.14 average analyst estimate compiled by Bloomberg. While sales surged 37 percent to $524.6 million, operating expenses climbed even higher, up 48 percent to $376.9 million, New York-based AMC said today in a statement.

“This will be a consistent theme as the environment for finding new hit shows is more competitive than ever,” Alan Gould, an analyst at Evercore Partners Inc., said in a research note. “It will be very challenging, and expensive, for AMC to repeat the trifecta it had with ‘Walking Dead,’ ‘Breaking Bad’ and ‘Mad Men.’” He has the equivalent of a neutral rating on AMC.

AMC shares slid 8.5 percent to $59.97 today, the biggest drop since August 2011.

On a conference call today, AMC Chief Executive Officer Josh Sapan said the company’s flagship AMC network has had relatively stable profit margins as its investment in hit shows has paid off. Expenses are rising because the company is attempting to draw audiences to its other channels -- IFC, WE tv and SundanceTV.

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