Support slackens for DreamWorks

Wall Street is scaling back its dreams for shares of DreamWorks Animation SKG.

The Glendale studio’s stock tumbled Wednesday after the firm’s second-quarter earnings report late Tuesday.

Although DreamWorks’ profit of 28 cents a share (excluding a tax benefit) beat the consensus estimate of 23 cents, analysts are reining in their expectations for earnings growth over the next year.

Goldman, Sachs & Co. analyst Ingrid Chung said she still rated the stock a “buy” but pulled it from the firm’s highlighted “conviction buy list.” She cut her 2009 earnings estimate to $1.75 a share from $1.87, citing expectations for higher foreign marketing costs for the hit “Kung Fu Panda” and for DreamWorks’ next movie, “Madagascar: Escape 2 Africa” (due Nov. 7).

That’s the weak U.S. dollar coming home to roost: It’s costing DreamWorks more to market its films abroad.

Another expected drag on the bottom line -- although great for Glendale and environs -- is the company’s plan to spend $85 million over the next two years to expand and improve the Glendale studio, including for 3-D productions.

The stock ended down $2.72, or 8.7%, to $28.57, after falling as low as $27.20. It’s still up 12% year to date after falling 13% last year.

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