Markets

WWE Triumphs over Nemesis: The Sinking Stock Market

By Constantine von Hoffman

Updated on: August 5, 2011 / 2:56 PM EDT / MoneyWatch

WWE defeated the market's Thursday beat-down. Formerly known as World Wrestling Entertainment, WWE's stock went up after reporting quarterly profits had more than doubled. However, WWE will have to fight hard to keep those gains because its profits were about as real as WrestleMania's heavily-scripted fights.

The market's positive response to the WWE underlines how desperate people are for good news right now. Chairman and CEO Vince McMahon was very clear that the profit came because of a shift in the date of its annual WrestleMania event and without that earnings would have been flat:

Key operating metrics, such as average live event attendance and pay-per-view buys showed declines in the second quarter when evaluated on a comparable basis to last year (excluding WrestleMania).

Although the stock opened and closed even around 9.56 on Thursday, in mid-day trading WWE shares added 27 cents, or 2.8 percent, to $9.90. Given the 512 point drop in the Dow, just not losing value would have made it a winner. However WWE did even better on Friday, up at the opening to 9.69 and climbing to 9.83 at mid-day.

The company said its net income rose to $14.3 million, or 19 cents per share, compared with $6.3 million, or 8 cents per share, in 2010's second quarter. After adjustments profit was 21 cents per share on revenues of $142.6 million. The stock did well even though analysts had expected profit of 25 cents per share, on revenue of $139.3 million, according to data provided by FactSet.

In an investor conference call, McMahon highlighted the quarter's successes, but said it "could be a whole heck of a lot better." While WrestleMania drew over 1.0 million pay-per-view buys, the rest of the quarter's PPV numbers showed declines. Also troubling was that live event attendance declined during the quarter.

WWE said it had offset these lower attendance numbers by socking it to the rich and increasing prices for its most expensive tickets. CFO George Barrios said the increase, which began last year, hadn't hurt attendance amongtop-tier fans.

The company was disappointed in the failure of its movie That's What I Am, which lost $3 million. McMahon said the movie - which has an anti-bullying theme - didn't appeal to the WWE audience. (Critics were at best tepid about it.) Despite this Barrio said the company plans to invest further in its movie unit. Home video and magazine publishing revenues were down, but licensing revenues and digital media both did very well for the quarter.

More Troubling Signs

WWE is still trying to launch its own network. Single focus networks have yet to be very successful and those that have lasted are long-term projects underwritten by the deep pockets of sports leagues like the NFL.

Still, in a market which has the economic version of the Atomic Knee-Drop driving it down, WWE is doing better than most would expect.

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