Motley Fool Rule Breakers recommendation IMAX (NASDAQ:IMAX) premiers its Q3 earnings numbers Thursday morning, and moviegoers want to know -- will it be a blockbuster or a bomb?
Judging from Wall Street forecasts, the suits are feeling optimistic. Analysts currently expect IMAX to report $36 million in sales and $0.07 per diluted share in profit. While that projected 13% sales increase might not look like much compared with last year, the profits estimate is another story entirely. In Q3 2004, IMAX reported just $0.04 per share in profit, so we're looking at a potential 75% increase in profits per diluted share. For a company currently trading at just 31 times earnings, that could make for quite an enthusiastic reception on Wall Street if IMAX hits its numbers.
But that's a big "if." IMAX itself is keeping mum on its own expectations for the quarter, and hasn't confirmed how close to the mark analysts are. When it reported earnings three months ago, the only guidance IMAX gave was for full-year fiscal 2005, for which it projected $0.35 to $0.38 per share. The charitable term for that kind of prediction is "optimistic."
After all, so far this year, IMAX has booked a grand total of only $0.06 per share in profits. If it hits analyst estimates tomorrow, that will still leave the company a whopping $0.22 short of the low end of its own guidance, and $0.24 short of the consensus estimate that analysts have posited for the company's full-year numbers. In other words, to meet even the most conservative of the expectations that it has established, IMAX would need to earn 69% more profits in Q4 alone than it will (hopefully) have booked in Qs 1-3 combined. To satisfy the analysts, it will need to best the rest of the year's results by 85%.
These tasks may look hopeless, but they're not without precedent. By the end of Q3 2004, IMAX had booked only $0.04 in profit. But the company caught a second wind in Q4, and sprinted forward to rack up an astonishing $0.19 per share in those three months alone.
Will IMAX repeat that feat tomorrow? Tune in here to find out.
Second-run Foolishness on IMAX:
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Fool contributor Rich Smith does not own shares of IMAX.
