Why IMAX Earnings Will Only Tell Part of the Story

By Markets Fool.com


Source: Wikimedia Commons.

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The first third of 2015 has been great for IMAX shareholders, as the stock of the big-screen entertainment company has climbed to unprecedented heights in just the past few months. IMAX is scheduled to release its first-quarter results on Thursday morning, and as you'd expect from the traditionally slow winter period, its latest financial report won't necessarily give investors a good sense of just how well the company is doing. With the movie-showcasing giant having made some smart strategic moves lately, though, investors are optimistic about IMAX's long-term vision. Let's look more closely at what IMAX is likely to tell us later this week and what's ahead for the company in the months and years to come.

Stats on IMAX

Q1 Analyst EPS Estimate

$0.04

Change From Year-Ago EPS

(20%)

Q1 Revenue Estimate

$54.09 million

Change From Year-Ago Revenue

12.2%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

What's next for IMAX earnings?
Investors have toned down their views on IMAX earnings in recent months, reducing their first-quarter earnings projections by $0.03 per share and making a smaller downward adjustment for second-quarter projections. That hasn't stopped the stock from soaring 25% just since late January.

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Some of those gains came in the aftermath of IMAX's fourth-quarter financial report in February, despite weakness in its results compared to the previous year. Even though both sales and net income declined markedly from 2013's fourth quarter, IMAX investors looked instead at encouraging signs that the company has taken steps to find long-term growth. Between its continued international growth in theater counts and its content offerings to worldwide audiences, IMAX has shareholders excited about the company's future.


Source: IMAX.

Probably the best news for IMAX, though, is that interest in Hollywood has started to climb again in anticipation of some blockbuster releases in the coming couple years. The reawakening of the Star Wars franchise should drive moviegoers back into theaters, and with the full power of the Disney juggernaut behind it, the availability of interesting special effects should make viewing the films in an IMAX format particularly attractive for those looking for a true theater experience. Similarly, further releases from hit franchises such as TheAvengers could also help IMAX's long-term growth.

The other key driver for IMAX in the long run is its presence in China. Already, the emerging market's movie industry has grown exponentially, with the nation's box office revenue to pass that in the U.S. within the next couple years. IMAX already has more than 200 theaters in China, and it has deals to build hundreds more over the next decade. IMAX screens are hugely popular in China, accounting for as much as a fifth of many movies' total box office sales despite IMAX locations making up less than 1% of the total available screens within the country. With the company having sold a stake in its China division to a private equity company last year, IMAX hopes it can spur even greater interest in its Chinese holdings and take advantage of a growing middle class's thirst for entertainment.

In the IMAX earnings report, look beyond the numbers for the past quarter and instead focus on the company's comments about the coming summer months and its longer-term future. IMAX has done many things right in positioning itself to take maximum advantage of an improving consumer-financial picture in the U.S., and now it only has to make sure that it follows through well on its potential. If it does so, then IMAX stock could have even further to rise in the near future.

The article Why IMAX Earnings Will Only Tell Part of the Story originally appeared on Fool.com.

Dan Caplinger owns shares of Apple and Walt Disney. The Motley Fool recommends Apple, Imax, and Walt Disney. The Motley Fool owns shares of Apple, Imax, and Walt Disney. 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.