Why RealD Shares Rallied

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of 3-D cinema technologist RealD (NYSE: RLD  ) soared 22% today after the company's quarterly results topped Wall Street expectations.

So what: The stock has plummeted in recent months on rapidly declining fundamentals, but today's second-quarter beat -- a loss of just $0.09 per share versus the consensus estimate of a $0.19 loss -- suggests the worst is behind it. While revenue fell 20% year over year, management's cost-cutting initiatives and strategic shift toward consumer electronics are giving Wall Street a better feeling about RealD's longer-term prospects.

Now what: Don't expect the operating momentum to slow anytime soon. "As fiscal 2014 progresses, we continue to optimize RealD's financial performance and position our company for the future," said Chairman and CEO Michael Lewis in a press release. He added, "Our recently reduced operating expense structure, coupled with reduced theatrical installs beginning in our fourth fiscal quarter should further support [free cash flow] going forward." More important, with the stock still off about 50% from its 52-week highs, there might be some room left for less risk-averse Fools to benefit from that improvement. 

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