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Why Is IMAX Up 6.1% Since the Last Earnings Report?

Zacks Equity Research
All eyes will be on these hot stocks during this busy earnings week.

It has been about a month since the last earnings report for IMAX Corporation IMAX. Shares have added about 6.1% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Recent Earnings

IMAX reported better-than-expected results in the third quarter of 2017, despite the overall movie industry struggling of late. The company reported earnings of 8 cents per share, beating the Zacks Consensus Estimate of 3 cents. The bottom line, however, declined 33.3% on a year-over-year basis.

Total revenue in the third quarter of 2017 was $98.8 million, up 14.2% year over year. The figure also surpassed the Zacks Consensus Estimate of $84.7 million. Adjusted EBITDA margin in the reported quarter was 39.6%. Results in the quarter were aided by the impressive performance of some films, increase in theatre installations and high returns from IMAX screens. Global box office revenue at IMAX increased more than 17.4% to $218.8 million in the quarter.

Category-wise, Equipment and product revenues were $30.71 million, marginally down compared with the year-ago quarter. Services revenues totaled $49.82 million, up 33.9%. Rentals revenues totaled $15.85 million, down 0.9%. Finance income revenues were $2.42 million, up 5.8%.

Segmental Results

IMAX Theater Business generated revenues of $43.5 million, slightly higher than the prior-year quarter.Within this segment, IMAX system sales and sales-type leases were $25.11 million, up 15.2%. Ongoing fees and finance income was $2.45 million, down 14.8%. Joint revenue sharing arrangements-fixed fees were $2.66 million, down 51.8%. Theatre system maintenance was $11.51 million, up 11.8%, while Other Theatre revenues fell 35.1% to $1.59 million.

Network Business generated revenues of $42.64 million, up 16.8% year over year. Within this segment, IMAX DMR was $25.97 million, up 20.5%. Joint revenue sharing arrangements-contingent rent was $15.57 million, reflecting an increase of 9.8% and IMAX systems-contingent rent improved 40.4% to $1.09 million.

Other segments generated revenues of $3.73 million, down 41.3% year over year. Within this segment, Film distribution and post-production plunged a massive 38.9% year over year to $2.69 million, while Other revenues tumbled 46.7% to $1.04 million.

Liquidity

The company exited the third quarter with cash and cash equivalents of $157.71 million compared with $204.76 million at the end of 2016.

Network Growth Statistics

The company installed 51 theaters (including 2 upgrades) in the reported quarter compared with 50 (including 2 upgrades) in the third quarter of 2016. It signed 17 theatre agreements in the third quarter of 2017, down a significant 89.5% on a year-over-year basis. As of Sep 30, 2017, the total theater count in backlog was 545 compared with 547 in the year-ago quarter.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.

VGM Scores

At this time, the stock has a poor Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated also a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate investors will probably be better served looking elsewhere.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of this revision also indicates a downward shift.  Interestingly, the stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.


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