With the success of movies like Iron Man 3, theater companies are looking forward to the upcoming summer when more big-budget movies like Man of Steel and will be released. This is surely the time when these companies can make maximum revenues. So with many upcoming opportunities, it's time to pit Regal Cinemas (NYSE:RGC) against Cinemark Holdings (NYSE:CNK) to determine which is best for investors.
Tale of the Tape:
*as of 5/22/2013.
In the Blue Corner, the Challenger…
Cinemark Holdings Inc (CNK) owns 467 theaters in the United States and Latin America and has more than 5,000 screens. The company recently got approval from U.S. antitrust authorities to buy Rave Holdings' movie theaters, if the companies sell theaters in three states.
The company a opened 10 screen, all-digital movie theater which is based on the new concept of Cinemark NextGen cinema design. Cinemark is considered the forerunner in the theatrical exhibition industry and the new design will incorporate the latest technology, superior facilities and other options like party rooms to bring in customers.
In order to lure the younger generation toward its theaters, Cinemark rolled out the concept of "Summer Movie Clubhouse," which shows G and PG rated films for kids at discounted prices for 10 weeks.
For the first quarter of 2013, the net income for the company came in at $32.6 million against the $42.1 million for the corresponding quarter of 2012. The diluted earnings per share came in at $0.28 compared to $0.37 per share in the first quarter of 2012. The revenue for the first quarter came in at $547.8 million compared to $578.8 million for the corresponding quarter of 2012.
To streamline operations, the company has signed an agreement with Grupo Cinemex, under which the company will sell all the issues and those outstanding shares of capital stock Cinemark de Mexico S.A. de C.V. and its subsidiaries to Grupo Cinemex, S.A. de C.V. and Cadena Mexicana de Exhibicion, S.A. de C.V. (Cinemex).
The company's P/E ratio is 22.20 and the forward P/E is 14.95, which only reflects that the company has further room to grow in the future as the forward P/E substantially declines. The PEG ratio of the company is 1.71, which, if less than 1, would have been better but it still reflects room for an increase in share price.
However, for the second quarter, analysts are expecting low performance from the company, with he average estimate for profit coming down from $0.59 to $0.58 over the past three months.
In the Red Corner, the champion…
Regal Entertainment group (RGC) is the largest operator of multi-screen theaters in the United States, with 7,000 screens and more than 500 theater locations. The company increased its market cap and outperformed companies like Apollo Group, indicating that the market has more confidence in the company.
Regal Entertainment is opening a Regal Avalon Stadium 12 & RPX in 2014 along Georgia 400 near Atlanta, which will be full of the most advanced and luxurious amenities. Some of the luxury amenities that the company will incorporate include a foot rest on every seat for added comfort in addition to a table area for dining. The good thing about the location is that Atlanta is one of the most trade prosperous cities in the U.S.
The company has not been lagging in its innovations and has even signed an agreement with Yankee Candles to launch a popcorn-scented candle. Regal has been receiving accolades for making movie-going an accessible entertainment to all by adopting some of the most advanced technologies.
The entertainment company continues its acquisition spree and has recently acquired 43 theaters, which include 513 screens. Revenue for the first quarter of 2013 came in at $642.8 million. Earnings per share were recorded at $0.13 per share. Both earnings and revenues were lower than the year earlier quarter. The P/E ratio of the company is 24.03 and forward P/E is 17.19, which is again a good sign for the company. The PEG ratio is 6.68, which makes the stock a touch overvalued.
And the winner is…
Regal by a nose.
There is no doubt that Regal is the entertainment industry's most dominant U.S. company. However, it has a tough road ahead as other companies like Cinemark Holdings are ready to thrive on innovation. Both companies discussed above are implementing innovative techniques to pull in the crowd this summer, although the first quarter for both companies didn't go very well. However, Regal looks a tad ahead of Cinemark owing to acquisitions and innovations, which will act as a catalyst for impressive performance this summer.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: Black Coral Research is a team of writers who provide unique perspective to help inspire investors. This article was written Aman Jain, one of our Senior Analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article. Black Coral Research is not a registered investment advisor or broker/dealer. Readers are advised that the material contained herein should be used solely for informational purposes. Investing involves risk, including the loss of principal. Readers are solely responsible for their own investment decisions.