Dreamworks Animation SKG (DWA)

With this year’s ramped up production, DreamWorks has more than doubled its net income compared to this time last year. And the company is just warming up.

DreamWorks is looking at a jam-packed 2010, with three new animated (and 3-D) films poised for release.

The DreamWorks Animation team has also been hard at work this year building promotional alliances with McDonald’s, Intel, and Hewlett-Packard, working with Activision to develop video games, designing party favors and greeting cards with Hallmark, and partnering with several other companies to produce toys, mobile phone games, costumes and accessories based on DreamWorks characters.

Not to mention the DreamWorks theme park, character based restaurants, hotels and other tourist attractions scheduled for construction in Dubai.

Of course, with a gross profit margin of 40.9%, this will leave a pile of earnings for DreamWorks’ investors. Analysts expect earnings per share to rise 35% by the end of 2010.

If this seems a little low, it probably is. DreamWorks loves to outperform analyst expectations.

The company has not only beaten EPS estimates by over 20% each quarter in the past year, DreamWorks stunned investors by overshooting investors’ March EPS projection by 46%!

Next generation DVD format adoption and the introduction of 3D exhibition in theaters create a more accommodating home entertainment market and a more favorable industry backdrop over the next few years.

The growth of international markets will increase the demand for CG animated films. Revenues from international markets continue to make up an increasingly larger portion of DWA's revenue.

DWA continues to be a leading player in CG animation, one of the most popular film genres.