Analyst: Spreading Out Release Dates Could Improve Cinemark Holdings Outlook

Old Movie Theater

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Cinemark Holdings (NYSE:CNK) will report Q1:14 results before the market open on Tuesday, May 6, and will host a conference call at 5:30am PT (dial-in: 888-755-8910, webcast: investors.cinemark.com).

We expect Q1:14 in line with our recently revised estimates for revenue of $597 million versus consensus of $591 million and EPS of $0.26 versus consensus of $0.27. We expect concessions revenues to exceed our estimates during the quarter driven by higher-than-expected attendance and higher average concessions per patron. The release slate this quarter was dominated by family friendly movies, which tend to drive a higher attach rate for concessions sales.

We expect admissions revenue per average screen for the International segment to face significant foreign exchange headwinds. According to Box Office Mojo data, we estimate that the largest Latin American box office markets for Cinemark grew roughly 5 percent year-over-year on a constant currency basis.

2014 is off to a strong start for domestic box office results and IMAX films. Captain America: The Winter Soldier is producing summer blockbuster results in April, with $225 million since opening April 4. The highest grossing film quarter-to-date in Q2:13 was The Croods, at roughly $72 million.

After last year’s overcrowding of the summer and holiday release slates driving several large budget blockbuster flops and the recent successes of Gravity (in October) and The LEGO Movie (in February) during traditionally slow months, studios discussed considering branching out beyond the traditional months for bigger movie releases. Spreading out the release slate could help both studios and exhibitors fill more seats in traditionally slower months. The release of Captain America: The Winter Soldier in April, kicking off summer action movies roughly a month sooner than normal, is a sign that studios may be coming around to the concept of spreading out the release slate.

Maintaining our NEUTRAL rating and maintaining our price target of $34. After accounting for Cinemark’s ownership stake in National CineMedia, we arrive at a $34 price target, which reflects roughly an 8.0x EV/EBITDA multiple on 2014 estimates, above its historical multiple and peers. We maintain Cinemark’s multiple to reflect its growth opportunities domestically and internationally, increased cash available for more expansion in Latin America balanced with increasing net debt.

Michael Pachter is an analyst at Wedbush Securities. 

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