On Aug 12, 2014, we issued an updated research report on IMAX Corp. ( IMAX). Blockbuster Hollywood releases, increasing number of theater installations, higher backlogs and a growing presence in China will continue to drive the company’s growth going forward.
IMAX has delivered positive earnings surprises in two of the last four quarters last year, with an average beat of a negative 3.70%. In second-quarter 2014, the company’s top and the bottom lines outpaced the respective Zacks Consensus Estimate.
IMAX is set to garner strong box-office revenues with strong 3D movie line-ups for the coming quarters. The blockbuster action flick, Transformers 4, was screened across 75 IMAX theaters in China toward the end of second quarter, and is expected to drive the company’s box-office business further in the forthcoming quarters.
Notably, IMAX announced a content delivery agreement with Wasu Digital TV Media Group as part of the IMAX TCL home theater initiative. The company also entered into a multi-picture agreement with The Walt Disney Company ( DIS).
Recently, IMAX also signed an agreement with Europe’s major cinema operator, Nordic Cinema Group, to install a theater at the latter’s SF Bio multiplex. Moreover, the company has teamed up with South Africa’s leading movie chain company, Ster-Kinekor, to launch its first theater in the country.
Despite a strong backlog of 419 theaters, IMAX has given a tepid installation guidance of around 112 systems in 2014. The company’s business model is gradually shifting from equipments to box-office releases. As a result, it is becoming increasingly dependent on the success of Hollywood films. The company’s future performance now depends on the selection of movies the company makes and their performance on IMAX theaters.
IMAX currently carries a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Better-ranked stocks worth considering in the same sector include Lions Gate Entertainment Corp. ( LGF) and Media General Inc. ( MEG). While Lions Gate sports a Zacks Rank #1 (Strong Buy), Media General has a Zacks Rank #2 (Buy).