IMAX Looks for Blockbuster Results in 2015

By Markets Fool.com


Source: IMAX

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In a world where home theater has become one of the fastest growing markets in the entertainment business, IMAX still believes that delivering a big screen experience appeals to moviegoers. Yet with the company slated to report its fourth quarter results on Thursday morning, IMAX could see its earnings fall substantially from year-ago levels, as a shortage of blockbuster movies to close out 2014 stalled momentum in an otherwise solid year.

Nevertheless, investors are more optimistic about 2015, and they will be watching closely to see if the big screen specialist can keep up with their expectations for future growth. Let's take an early look at how IMAX has recently performed and whether investors should expect strong upcoming results.

Stats on IMAX

Analyst EPS Estimate

$0.30

Change From Year-Ago EPS

(32%)

Revenue Estimate

$95.88 million

Change From Year-Ago Revenue

(8.7%)

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance

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Can IMAX project big earnings?
Investors have had mixed views of IMAX earnings in recent months. They have cut their fourth quarter estimates by a penny per share while at the same time boosting their 2015 projections by a penny. The stock has risen 20% since early November.

Third quarter results reflected the on-again, off-again nature of businesses that rely on the popularity of Hollywood releases. Global box office receipts surged 28% with revenue up 18% year-over-year. Adjusted net income soared almost 80%, and cash flow hit a record level for the quarter. IMAX enjoyed broad growth with production and remastering and joint-revenue-sharing arrangements showing the biggest gains.

Game of Thrones will be a key experiment for IMAX. Source: HBO

Yet one of the most fascinating opportunities for IMAX will come from an area that has traditionally been antithetical to movie success: the television industry. In January, IMAX announced that it would team up with HBO to screen two episodes from the fourth season of Game of Thrones, along with a preview for the fifth season. In fact, IMAX ended up delaying the screening in order to get a larger number of its operators on board, eventually showing the series in about 200 theaters. By catering to fans of particular shows, IMAX could lure viewers out of their homes, potentially introducing a whole new distribution channel that could reawaken greater interest in movie theaters.

Source: AMC

Still, IMAX will rely to some extent on the ingenuity of theater operators seeking to broaden their audiences once again. For instance, AMC Entertainment is looking at introducing a subscription service that would allow moviegoers to see a set number of showings per month, and if that raises interest in the IMAX big-screen format, then you could see AMC and other companies looking to bolster their infrastructure in order to handle what they hope will be higher overall demand.

Meanwhile, IMAX has to face the fact that 2014 was a disappointing year for theaters in general. The summer in particular was a huge letdown from record-breaking revenue in 2013, with box office figures at their worst levels since 2006. For the full year, early figures show revenue off 5%, the worst showing in three years. Without a growing demand for movies, IMAX will have trouble sustaining any domestic growth.

In the IMAX earnings report, look at how well the international expansion plans are going. The company has done an excellent job of expanding its global footprint, and if sales are better abroad, it could be a testament to IMAX's staying power. Yet with potential currency headwinds, shareholders should temper their enthusiasm for global growth. More importantly, if IMAX details its plans for 2015, listen closely for a strategy that makes sense and is likely to succeed.

The article IMAX Looks for Blockbuster Results in 2015 originally appeared on Fool.com.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Imax. The Motley Fool owns shares of Imax. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.