What happened

Shares of National CineMedia (NASDAQ:NCMI) surged as much as 23.1% on Friday, boosted by a strong fourth-quarter earnings report. By 12:50 p.m. EST today, the provider of advertising services in movie theaters had settled down to a milder gain of 15.3%.

So what

Your average analyst had been looking for fourth-quarter earnings near $0.21 per share on sales in the neighborhood of $140 million. Instead, adjusted earnings rose 4% year over year to $0.24 per share and top-line revenue increased by $7% to $147 million. The company also increased its quarterly dividend from $0.17 to $0.19 per share.

A very large $100 bill peeks out between two red curtains, with a spotlight focused on Benjamin Franklin's face.

Image source: Getty Images.

Now what

The company recently launched new ad services, showing five minutes of marketing as the lights dim at the advertised showtime. Another minute of ad space is inserted between the end of movie trailers and the start of the movie. Both of these slots are marketed as premium products at higher payment rates per minute. Lower-cost marketing materials fall between the "lights-down inventory" slot and regularly scheduled movie trailers, as usual.

This strategy helped National CineMedia exceed expectations in the fourth quarter despite disappointingly small audience sizes. The company will focus on expanding the platinum time slot in 2020, selling it as a valuable tool for reaching highly committed audiences.

Investors embraced the analyst-stumping results, and National CineMedia's stock is now trading at levels not seen since the fall of 2018. This volatile stock is prone to sharp swings based on the quality of each quarterly report, and this was a good one.