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Will AMC's Run Continue When It Reports Earnings?

By Danny Vena – Nov 7, 2018 at 3:33PM

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After a bad 2017, the movie exhibitor has come back strong so far this year.

After reaching near-record highs in late 2016, AMC Entertainment Holdings (AMC -0.00%) spent much of last year in decline and losing half its value. The movie theater company has been the victim of declining ticket sales and changing consumer habits.

The company believes it can turn things around by revolutionizing the exhibition business with reclining chairs, premium food and beverage concessions, and the addition of more premium large-format screens. The biggest boost may come from its Stubs A-List program, which allows movie lovers to see up to three movies per week for $19.95 per month.

We'll have a much better picture of the situation when AMC reports the financial results of its third quarter after the market closes on Thursday, Nov. 8. Let's look at the company's recent results and see what investors should be watching this quarter.

A lighted marquee outside an AMC theater.

Image source: AMC.

A welcome surprise

Investors got a boost of confidence when AMC reported its second-quarter results. Revenue grew 20% year over year to $1.44 billion, with both major segments contributing: Admissions revenue increased 17.7% to $896.3 million, while food and beverage sales grew 19.2% to $445.8 million. 

Net income of $22.2 million was far better than the loss of $176.5 million the company reported in the prior-year quarter and led to earnings per share of $0.17 compared with a loss per share of $1.35 in the year-ago period. This was led by EBITDA margins at its U.S. theaters that increased to 19.7%, up 700 basis points from the prior-year quarter.

There were other impressive metrics as well. Food and beverage revenue per patron in the U.S. grew to $5.29, the highest of any major U.S. operator, according to the company. In addition, per-screen attendance at the chain grew by 21.1% year over year.

Earlier this week AMC announced that AMC Stubs, its loyalty program, topped 17 million members. The top tier -- Stubs A-List -- achieved its one-year membership goal of 500,000 paying subscribers in less than five months. AMC also said that it plans to roll out reserved seating in all AMC-branded theaters and AMC Dine-In theaters and expand its mobile ordering, which allows patrons to pay for their food and drinks when they purchase their tickets.

What the quarter may hold

AMC has embarked on a multipart plan to improve its results. The company has been repurchasing shares as part of a $100 million buyback authorization, and selling noncore assets in an effort to deleverage the business. AMC also paid a special dividend of $1.55 per share to shareholders on Sept. 28. 

AMC doesn't provide quarterly guidance. Analysts' consensus estimates are calling for revenue of $1.22 billion in the quarter, an increase of 3.7% year over year, and a loss per share of $0.47, a decline of 42%. 

The company has made good on the promises that it made last year by bringing its costs in line, selling noncore assets, and returning capital to shareholders. AMC has said it is seeing a solid return on its investment in reclining seats and premium food and beverages, and that its subscription movie service is sustainable. Investors have rewarded the company by bidding up its shares by 22% so far this year.

We'll have a better idea if the company can keep up the momentum when AMC reports earnings on Thursday.

 

Danny Vena owns shares of AMC Entertainment Holdings. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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