Marvel Entertainment reported a year-over-year sales gain of 14% for the third quarter, but net income slid from $23.4 million to $13.2 million as total expenses rose to $62.9 million from $46 million in the third quarter of 2005. Still Marvel's performance beat analysts' predictions and Marvel raised and refined its 2006 per share earnings forecast from a previous forecast of 50 to 60 cents to 61 to 64 cents.
Wall Street responded by sending Marvel stock to a 52-week high before profit-taking depressed the price somewhat (it still finished the day with a solid 5.79% gain).
For the third quarter publishing revenues ($30.9 million) actually outstripped licensing ($28.3 million), a rare event for the 21st Century version of Marvel. Marvel cited higher sales of trade paperbacks and hardcovers to both the direct and bookstore markets as well as the signal success of its Civil War crossover event in boosting publishing sales.
Licensing was down in large part because of a decline in revenues from the Spider-Man property, which has become the major engine driving Marvel's licensing sales.
Toy sales were up nearly 50% for the quarter from $22.1 million in 2005 to $33 million this year, but with Marvel having to manufacture and maintain inventory on its own toy lines this year (Hasbro takes over in 2007 see -- 'Marvel Inks Five-Year Pact With Hasbro') higher expenses meant that operating income for the toy sector dropped nearly 30% from $10.5 million in 2005 to $7.4 million in the most recent quarter.
Everyone knew going in that 2006 would be a tough one for the company because of the lack of movie releases and having to assume the toy manufacturing mantle, but Marvel has done a good job of managing expectations this year and managing to beat its own and analysts' forecasts. When the fact that 2007 figures to be a much better year for Marvel thanks to Spider-Man 3, the Hasbro deal, Ghost Rider and Fantastic Four 2 is considered, it is no surprise that Marvel's stock is on the rise.
Marvel's next challenges involve turning the rosy prospects of 2007 into substantial profits and then, starting with the release of Iron Man in 2008, proving that it can produce highly successful films based on its own properties in house.