Why National CineMedia Shares Popped

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What: Shares of National CineMedia (NASDAQ: NCMI  ) were dazzling investors today, popping as much as 19% after reporting quarterly earnings.

So what: The pre-movie advertising specialist topped earnings estimates by $0.01, with an adjusted profit of break even, or a loss of $200,000 in net income. Revenue increased 3.9%, to $82.2 million, also ahead of estimates. Sales in its Advertising segment, the bulk of the company, jumped 11%, while its Fathom Events segment, which includes pre-recorded entertainment, fell back 33%. CEO Kurt Hall said his company expanded its geographical reach during the seasonally weak quarter, and that the economic recovery has helped drive advertising revenue as well as in additional platforms such as online and mobile.

Now what: The company's revenue guidance for the current quarter was slightly ahead of estimates, while full-year guidance matched. For most investors, though, National CineMedia seems to be a dividend play, as the company currently offers a generous 5.3% yield.  However, that gives the company a payout ratio over a 100%, as analysts are expecting EPS of just $0.69, after $0.58 last year. On a free cash flow basis, the company has generated enough income to fund dividend payouts in two of the last three years; but in 2012, it had to borrow $85 million. The item merits investor attention going forward.

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Jeremy Bowman

Fool since 2011. I write about consumer goods, the big picture, and whatever else piques my interest. Follow me on Twitter to see my latest articles, and for commentary on hot topics in retail and the broad market.

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Related Tickers

3/27/2015 3:59 PM
NCMI $15.05 Up +0.06 +0.40%
National CineMedia… CAPS Rating: **