Pebble's Story
Wearing away
wears
wearing
away away.
-- A.R. Ammons
And that's what seems to be happening to Regal Entertainment Group
What analysts say:
-
Buy, sell, or waffle? Eight analyst firms have published opinions on Regal lately. Five of them are buying, and the other three holding. In our Motley Fool CAPS database, it's a perennial one-star stock, based on 55 user ratings.
-
Revenues. The consensus forecast calls for $598 million, a meager 2.2% year-over-year boost.
-
Earnings. The average analyst expects $0.09 of profit per share, same as last year.
What management says:
"In fiscal 2006, Regal Entertainment benefited from a rebound in industry attendance," said CEO Mike Campbell in the latest earnings report. In the attendant conference call, he explained that the upcoming slate of movies looked strong on paper, and that digital projection systems are improving the customer experience.
What management does:
All the margins are stable enough, but the net take is close enough to breakeven that even small shifts in the dollar amount result in huge percentage swings, as the growth figures show. They also show you that revenue growth has essentially ground to a halt.
|
9/2005 |
12/2005 |
3/2006 |
6/2006 |
9/2006 |
12/2006 |
|
|---|---|---|---|---|---|---|
|
Gross |
48.3% |
48.6% |
48.6% |
48.8% |
48.6% |
48.6% |
|
Operating |
11.4% |
11.4% |
11.6% |
12.2% |
12.8% |
12.8% |
|
Net |
3.3% |
3.6% |
3.6% |
3.1% |
3.5% |
3.3% |
|
FCF/Revenue |
9.6% |
9.6% |
9.8% |
10.5% |
8.0% |
6.9% |
|
YOY Growth |
9/2005 |
12/2005 |
3/2006 |
6/2006 |
9/2006 |
12/2006 |
|---|---|---|---|---|---|---|
|
Revenue |
(0.7%) |
2.0% |
0.8% |
3.7% |
4.9% |
3.2% |
|
Earnings |
(30.5%) |
11.3% |
23.5% |
(12.7%) |
13.5% |
(6.0%) |
One Fool says:
Regal just paid out an extra $2-per-share dividend, along with the regularly scheduled $0.30 payout, which usually feels like a shareholder-friendly move. On the other hand, I'm moved to wonder whether that's the best use of cash the company could find. It can't even buy growth anymore?
Not only that, but it's borrowed money -- $2 per share works out to about $300 million, and the company opened a $450 million credit line in February. Cash on hand? Some $162 million. Long-term debt? Almost $2 billion. Too much leverage can be dangerous, folks.
With AMC and CineMark joining the public markets in the next few months, you'll have a choice of dinosaurs to choose from in the movie theater business, other than Regal and itty-bitty twosome Marcus
The increased cooperation between the bigger players, including a consolidated digital advertising operation, hints at a coming round of consolidation. Then again, that's something Regal could have used its spare cash to do.
Some of these operator stocks have been rising lately, and the analyst gang sure seems to like all of the publicly traded options today. Yes, it's supposed to be a good year for movies, with surefire hits like Spider-Man 3, another Pirates of the Caribbean installment, Shrek the Third, and the latest Harry Potter moneymaker all lined up behind the batter's box.
But this, too, shall pass. I have yet to see a major cinema chain do anything creative to bring back the old-time glamour of movie night. The only remaining competitive advantage is that every movie comes to the big screen a few months before its DVD release. It's not good enough anymore.
No, the consumer today likes enormous LCD TVs, fed by DVDs. Let me stop right there, lest this forecast turn into a venomous six-page diatribe. Just know that I expect very little out of Regal this week -- or year, or decade.
Check out these sequels, er, prequels:
Fool contributor Anders Bylund watches lots of DVDs but holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure looks great on the silver screen.
