IMAX (NYSE: IMAX ) is back in vogue after a strong fourth quarter sent shares higher yesterday. The large-screen theater operator reported a 17% jump in revenue to $77.8 million and net income that more than doubled to $12.9 million, or $0.19 per share. On an adjusted basis, earnings were $0.23 per share, above Wall Street estimates of $0.16.
The strong results show the progress IMAX has made in diversifying its business beyond the random domestic blockbuster. The movie studio didn't have its big hits like Marvel's The Avengers or The Dark Knight Rises, but IMAX had its second most profitable quarter with Sony's Skyfall and two weeks of The Hobbit: An Unexpected Journey. But Skyfall was the fourth highest box office domestically in 2012, so it wasn't a game changer for IMAX. Still, results were solid because IMAX is leveraging international demand and local content.
The growing business model
Two of the major focuses of IMAX have been growing its footprint internationally and attracting local content. This year the company has films coming out for Russia, India, and China-only releases. It can put big global blockbusters on its screens internationally while also throwing in a local flick here and there to keep theaters busy and revenue coming in.
The struggles of 3-D
Where IMAX has a big advantage over 3-D-only operator RealD is the ability to go without 3-D when necessary. Many films on the slate for 2013 are still 3-D, but the fad appears to be settling into a holding pattern. For example, The Dark Knight Rises was a huge hit in IMAX, but wasn't available in 3-D because Christopher Nolan chose not to shoot in 3-D. IMAX is a winner whether it's 3-D or not.
Foolish bottom line
IMAX has been on a nice run recently, but it's suddenly become an expensive stock. Analysts are expecting earnings of $0.98 next year, so the stock trades at around a 26 forward P/E multiple. Given the high-margin growth ahead and its tendency to beat estimates, this isn't a crazy price, but it isn't a steal, either. I'd like a pullback to near $20 before getting too excited about this stock.
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