Will Thursday's Second-Quarter Earnings Send Imax Shares Higher?

Jul.25.12 | About: IMAX Corporation (IMAX)

On Thursday, large movie screen company Imax (IMAX) will report second-quarter earnings. The earnings will come before the market opens and will hopefully showcase Imax's strong 2012 blockbuster lineup. Analysts are calling for $0.21 in earnings per share. For the full year, analysts want to see $0.91 in earnings per share. Imax has not beat earnings any of the last four quarters, with results being -25%, even, -20%, and -65% compared with estimates.

Movies that were released on Imax in the first quarter included:

  • "Titanic 3D"
  • "Battleship"
  • "The Avengers"
  • "Dark Shadows"
  • "Men in Black 3"
  • "Madagascar 3"
  • "Prometheus"
  • "Rock of Ages"

"The Avengers" made over $60 million on Imax screens through the end of May. The movie was a huge success for movie theaters and Imax alike. Imax signed the movie late in the year and only had room for it in a limited run due to other commitments. However, it's deals like these that make sure Imax capitalizes on the big blockbusters and making sure it has relevant newer films on its screens throughout the year.

Imax reported strong box office results from "The Dark Knight Rises." In three days, the movie took in $19 million on 332 screens in North America. This represents a per screen average of $57,200. Internationally, Imax saw a higher per-screen average with $75,000 from the 64 screens showing "The Dark Knight Rises." Imax saw a total of $23.8 million from 396 screens over the opening weekend of the third installment in the newest Batman film trilogy. "The Dark Knight Rises" has been well received by critics. The movie has a score of 87% on Rotten Tomatoes, representing a large majority of positive reviews. On IMDB, the movie has a 9.2 rating with over 104 thousand votes from people all over the world.

Prior to "The Dark Knight Rises," Imax showed "The Amazing Spider-Man" on screens. The movie grossed $24 million on 444 Imax screens worldwide. Spider Man made $14.3 million in North America (307 screens) and $10.0 million in international markets (137 screens).

Recently Imax continued its international and domestic expansion with these announced deals:

  • July 11 - Signed a deal to bring three more Imax theaters to China. This brings the number of Imax theaters in operation or signed to open to an amazing 229. The new screens will open November 2012, January 2013 and September 2013.
  • July 16 - Signed a deal with AMC to add eight more joint-venture Imax theaters. An additional 10 theater screens may be added to this deal in the future. The deal also sees two existing Imax screens converted to the joint-venture revenue model, giving Imax a percentage of lifetime movie and concession sales. AMC now has a total commitment of 138 Imax screens, with 125 of those already in operation.
  • July 16 - Partnered with TGV cinemas to add seven more Imax screens in Malaysia. This brings the total commitment to eight with TGV. Malaysia is seen as one of Imax's key growth regions in the Asian area.

In my last article, I wrote about Imax's five-year plan for international growth. Imax is around 30% toward its long-term goal of 1700 Imax screens around the world. Key areas for growth were Latin America and China, where Imax believes it was at less than 20% market penetration. Imax continues to release new announcements of additional screens for the company. Many of the company's new deals come from repeat customers, like TGV and AMC above.

The first half of the year was one of the best in Imax's history in terms of blockbuster movies hitting the screens. In the second half, Imax has several potential blockbusters, but also room to add more movies to its pipeline. Here is a look at the rest of the year after "The Dark Knight Rises" vacates Imax theaters.

  • "Resident Evil: Retribution" - September 14
  • "Frankenweenie" - October 5
  • "Skyfall" - November 9
  • "The Hobbit" -December 14

Along with these wide-release movies, Imax has also actively been getting regional movies to be showcased on international Imax screens. In December, Chinese moviegoers will be able to see Chinese Zodiac, starring Jackie Chan, on Imax screens in the country. Likewise, Russia has a similar deal in 2013 to bring "Stalingrad" to the big screens in October. Imax has already actively pursued its 2013 movie schedule with releases including: "Gravity," "Start Trek 2", and "Catching Fire."

As you can see there is still room on the second half of 2012's schedule to show a few more big release movies on Imax screens. Here are my picks for some potential announcements:

  • August 3rd "Total Recall"
  • August 10th "The Bourne Legacy"
  • November 16 "Breaking Dawn Part 2"
  • November 21 "Rise of the Guardians"
  • December 25 "Django Unchained"

Shares of Imax are up 29% year to date. Many analysts and investors believe the strong movie pipeline has already been built into Imax shares. The company does have a high multiple with a current price to earnings of 25 and a forward price to earnings of 21. Shares are marginally off of their 52-week high of $26.68. Goldman Sachs recently initiated shares of Imax with a buy rating. At the same time, it put neutral ratings on both Cinemark (CNK) and Regal Cinemas (RGC). A beat by the company could send shares to a new year high. Likewise, an earnings miss will be drastic and could send shares down over 10% as so much of the huge blockbuster year has already been priced in. I remain bullish on shares of Imax and am holding my shares.

Disclosure: I am long IMAX.