As movie rental company Movie Gallery (NASDAQ:MOVI) fades to black, it will report Q4 2006 financial results on Monday, March 19.

What analysts say:

  • Buy, sell, or waffle? Not much is playing at the Wall Street multiplex. Five of the six analysts covering Movie Gallery say "hold," while one says "sell."
  • Revenues. Revenues are forecast to drop 2% to $664.1 million.
  • Earnings. Comparing year-over-year changes in profits is probably not meaningful, since the company reported huge one-time expenses last year, resulting in losses of more than $17 per share. For this quarter, analysts actually expect a profit of $0.25 per share on average, but they range from a $0.95 loss to a $1.15 gain.

What management says:
You can rent a movie just about anywhere these days, but apparently, not too many people are interested in getting one from Movie Gallery. Lost in the battle between Netflix's (NASDAQ:NFLX) online supremacy and Blockbuster's (NYSE:BBI) brick-and-mortar dominance, Movie Gallery and its Hollywood Video acquisition (from which I'd occasionally pick up a movie when I was in between Netflix rentals) have been struggling to maintain a semblance of relevance.

That's been hard, and mounting losses haven't made it any easier. Movie Gallery's acquisition of MovieBeam may be a chance to break out from the deterioration witnessed in its storefront operations, but it seems a bit of a gamble, and it entails a lot of risk. The set-top box model looks like it might be a hard sell.

What management does:
At the end of last month, Movie Gallery released preliminary figures for the fourth quarter, showing that its situation was not improving. Same-store sales were down 32%, while comparable revenues were flat at its Movie Gallery outlets and down 4% at Hollywood Video. Although it's experiencing operational difficulties of its own making, Movie Gallery is also hampered by lackluster movie releases. When studios release few blockbuster movies, the resulting doldrums trickle down to the rental companies.

























All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Movies, movies everywhere, but customers are still hard to come by at Movie Gallery. Underscoring just how irrelevant Movie Gallery is becoming, it continues to close down stores and pursue leasing arrangements for unused space at remaining ones. That doesn't seem to be a winning combination, when you can just as easily rent current hits at McDonald's (NYSE:MCD) for just one dollar through its RedBox joint venture with Coinstar (NASDAQ:CSTR).

With smaller footprints leading to smaller sales -- even if Movie Gallery will generate income from the leased space -- investors can hardly conclude that this company deserves their dollars. MovieBeam may not turn out to be the godsend the company desperately needs. Movie Gallery won the battle but lost the war in its acquisition of Hollywood Video, and although MovieBeam was cheap by comparison, it could be yet another of the Quixotic ventures that hubris demands some companies undertake.

Fade in on further Foolishness:

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Fool contributor Rich Duprey does not own any of the stocks mentioned in this article, though he does rent movies two at a time from Netflix. You can see his holdings here. The Motley Fool has a disclosure policy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.