The clock is ticking on the country's leading multiplex operator, and this isn't necessarily a bad thing. AMC Entertainment Holdings (AMC) reports fourth-quarter results shortly after Tuesday's market close, and it might be a better-than-expected financial performance.
With 2021 closing out substantially stronger than it began for the movie theater industry -- and AMC itself gaining market share and doing a great job growing beyond sluggish ticket sales -- there's potential for a surprisingly bullish financial update. AMC stock is trading 74% below its peak nine months ago, so shareholders can use some good news.
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Screen test
Last year saw the industry improve as 2021 played out. Comparisons to 2020 were going to be solid since chains were shuttered for months and studios delayed high-profile releases. The real measuring stick is 2019, and the industry is taking steps to get back to its pre-pandemic levels. Domestic box office receipts were 60% lower for all of 2021 when stacked up against 2019, but a couple of highly anticipated Marvel releases helped narrow the deficit to a 28% decline for the fourth quarter of last year compared to the same holiday period of 2019.
AMC should fare better than the industry average. Analysts are bracing for a small loss on $1.09 billion in revenue for the fourth quarter, 25% below where it landed for the same three months two years earlier. There are some promising signs for AMC to fare better -- at least on the top line.
Let's start with the third quarter. The two-year comparison for domestic box office receipts was 51% lower for the third quarter, but AMC's revenue declined by just 42%. In terms of ticketing, AMC is gaining market share. It didn't lose the momentum that its largest rival did when Regal Cinema parent Cineworld Group shuttered its theaters a second time in the fall of 2020. AMC stayed open through the lull of blockbuster releases, but it also grew its appeal by expanding the number of theaters that offered mobile ordering of concessions, reserved seating, and private theater rentals.
It's not enough to move the needle just yet, but AMC has been slowly growing its reach by picking up a small handful of multiplexes abandoned by its rivals. The biggest surprise could come from its concession stands. Food and beverage sales per customer have risen sharply for AMC in recent quarters, and this is a high-margin business that the exhibitor doesn't have to share with Hollywood the same way it has to with movie tickets.
If AMC does get tripped up it would be in any potential guidance it offers for the current quarter. Domestic box office receipts have plummeted 49% through the first two months of this year against the same period in 2020. That sting could prove temporary. The pipeline is loaded with the superhero and action flicks that have fared so well in the pandemic era. Rising costs could also prove problematic given the surge in labor, energy, and occupancy expenses, but AMC's margin gains on its strengthening concession sales could offset some of that sting.
AMC will also talk up its initial success in offering non-fungible tokens (NFTs) to spur preorders of tickets to big movies, helping distance the chain from Regal and other movie theater stocks. It should have a good story to tell on Tuesday, and while valuation and balance sheet concerns aren't going to go away, they could be less thorny in the wake of a potential blowout quarterly performance.
