It seems almost every day, there's a new Hollywood blockbuster "opening in theaters everywhere." Tomorrow, it will be a theater supplier and builder that's opening its books to investors everywhere, when IMAX (NASDAQ:IMAX) reports Q1 2006 results in the morning.
What analysts say:
- Buy, sell, or waffle? Seven analysts follow IMAX, which rates five buys and two holds.
- Revenues. Analysts are looking for a 17% drop in sales tomorrow, to $26 million.
- Earnings. Wall Street doesn't expect any. On the contrary, analysts expect to see a reversal of last year's profit for a $0.07-per-share loss tomorrow.
What management says:
In March, IMAX dropped a bombshell: The company "recently received several unsolicited inquiries" and is now thinking about selling itself to one of the suitors. The news immediately lifted the stock, but with no subsequent details on a sale being imminent, those gains quickly dissipated. IMAX stock now trades just four bits above its preacquisition-news price.
Actually, it's hard to tell whether it was the acquisition news that moved the price, because on the same day the news broke, IMAX released its earnings numbers for Q4 and all of fiscal 2005. IMAX earned $0.40 per share for the quarter, a 62% increase over its Q4 2004 profits and $0.02 over the top of its previous guidance range.
What management does:
Brave words, and they're borne out in full by the below statistics. Over the past 18 months, IMAX has grown its gross margins a full 450 basis points, and its net margin by nearly 1,000 basis points. You don't earn profit margins like these unless you're selling something people want -- and you don't get to keepearning profit margins like these unless you've got no competition to speak of.
Margins % | 9/04 | 12/04 | 3/05 | 6/05 | 9/05 | 12/05 |
|---|---|---|---|---|---|---|
Gross | 45.1 | 48.5 | 48.9 | 50.1 | 50.5 | 49.6 |
Op. | 19.7 | 19.6 | 19.8 | 20.8 | 21.5 | 21.6 |
Net | 1.6 | 7.5 | 8.7 | 8.4 | 8.6 | 11.5 |
The Fool says:
In the latest six-month review of recommendations from Motley Fool Rule Breakers, analyst Rick Munarriz observed, "The days of IMAX as an independent entity are numbered. The company announced that it received several unsolicited buyout offers and is now exploring its strategic alternatives. ... Because there was more than one offer, it's conceivable that if the company does accept a bid, it will be at a generous premium."
To those Foolish words, I'd just add that if IMAX's suitors don't offer a generous premium, the company shouldn't give them the time of day. Sales are still rising, if slowly. Profit margins are growing by leaps and bounds. This is one company that should feel no need to play the part of "motivated seller."
If you're interested in reading the entire update on IMAX and the other Rule Breakers recommendations, try a free 30-day guest pass.
Competitors:
- Regal Entertainment (NYSE:RGC)
- DTS (NASDAQ:DTSI)
- Liberty Media (NYSE:L)
- Time Warner (NYSE:TWX)
Creditor:
- Wachovia (NYSE:WB)
IMAX is aRule Breakerspick, and Time Warner is aMotley Fool Stock Advisorrecommendation.
Fool contributorRich Smithdoes not own shares of any company named above.
