Analyst: Late Year IMAX Releases Will Struggle


The following is an excerpt from a report compiled by Michael Pachter of Wedbush Securities.

IMAX (NYSE:IMAX) will report Q2:13 (June) results before market open on Thursday, July 25, and hold a conference call at 5:30am PT (dial-in: 800-820-0231, conference ID: 1118760, webcast:

We expect Q2 results roughly in line with expectations. Our current estimates are for revenue of $78 million and EPS of $0.24, compared to consensus of $76 million and $0.27, respectively. The company does not provide detailed guidance or updates (for box office or for screen installations), so most sell-side estimates are merely educated guesses, with weekly box office figures affecting our views. We believe that Iron Man 3, Man of Steel, and Star Trek Into Darkness were the highest-grossing Q2 releases on IMAX screens, as many other releases played in select international theaters only. It is difficult to determine the percentage of total box office IMAX earned for each movie, as we do not know how many IMAX screens displayed each.

Lowering our 2H estimates, particularly for Q3, to reflect more conservative IMAX box office assumptions. We previously expected 300: Rise of an Empire, a movie well-suited to IMAX’s core fan boy audience, to perform well in Q3, but its release date has been moved to Q1:14. In addition, Pacific Rim, released last Friday, performed below our expectations for its opening weekend. We have also lowered our Q4 estimates to reflect our expectation that some of the late-year IMAX releases will struggle; the box office track records for the stars of many releases are spotty at best. The Hunger Games: Catching Fire and The Hobbit: The Desolation of Smaug will likely be among the year’s blockbusters, and we expect each to perform well in IMAX theaters.

We believe IMAX will continue to be cautious about full-year installation guidance, which is unlikely to change significantly, if at all. After installing 107 systems in 2012, IMAX expects to install 110-25 systems in FY:13. We view installation guidance as conservative given a large backlog of 283 theaters and a steady stream of signing announcements.

Maintaining our NEUTRAL rating and our 12-month price target of $28. Our price target reflects roughly 20x our FY:14 EPS estimate of $1.38. Although Q1 results were below expectations, the stock appears primed to benefit from a strong release slate towards the end of the year, as well as heavily back-end loaded installations and results.

Michael Pachter is an analyst at Wedbush Securities. 

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