Here’s Why IMAX and RealD Stocks Got Slammed

Despite a very healthy film industry that has seen two new movies top box office records this summer (Harry Potter 8 and Transformers), specialty components of the industry are lagging, according to their most recent earnings.

Thursday IMAX Corp. (NASDAQ:IMAX) published its second quarter fiscal results, with net income falling 87% from a year ago, pushing its shares down by more than 16% at the closing bell. The stock’s $3.74 slide to $19.43 was its steepest one-day drop since 2008. The company reported net income of $1.8 million, or $0.03 per share, compared with $13.3 million, or $0.20, a year ago. Revenue rose 3% to $57.2 million, in line with consensus estimates. Second-quarter film revenue was $18.7 million, down from $20.7 million. Gross box office from DMR (digital media remastering) titles was $107.7 million, Imax said, compared with $113.9 million in the second quarter of 2010. Analysts were quick to jibe the company for failing to deliver in a particularly weak quarter. “There is no justification for this kind of decline,” said Aravinda Galappatthige of Canaccord. “The value of the company is driven by future growth and the fact that this was going to be bad quarter was known.” Others blame the Canada-based company’s selection of “horrible, horrible” movies as responsible for the box office dregs.

3D-viewing company RealD (NYSE:RLD) is also getting hacked to bits by investors, dropping 16% in trading since their release of its first quarter earnings. Net revenue was $59.6 million compared to $64.5 million in the first quarter of fiscal 2011, though profits were up 9%. Net income was a record $9.6 million, or $0.17 per diluted share, representing an increase of 226% from $2.9 million, or $0.09 per diluted share, in the first quarter of fiscal 2011. Balance sheets still are still ugly though, with cash equivalents of $18.9 million and total debt of $26.7 million. There have been causes for concern about the future of 3-D film demand after 3D box office sales from the last Potter film failed to meet expectations.